Stock Market Today: Wall Street Rallies Around Reassuring Retail Data

The stock market enjoyed a broad rebound Tuesday as fresh economic data suggested the U.S. consumer is still shopping strong.

The U.S. Census Bureau said today that April retail sales improved by 0.9% over March. Though that was slightly less than the 1.0% expected, there was a show of strength in the significant upward revision to March’s numbers, to 1.4% growth from 0.5% originally.

“To the extent that markets are worried about a growth slowdown, this is good news, but it is also a further catalyst for the Fed to raise rates even higher to get inflation under control,” says Chris Zaccarelli, chief investment officer for registered investment advisor Independent Advisor Alliance.

While Zaccarelli joins other names in believing a recession is unlikely in 2022, “the Fed is going to need to raise interest rates to a point where they are likely to cause a recession in 2023 or 2024, and that gives us cause for concern,” he says.

Despite the promising retail data, success in retail stocks wasn’t a gimme.

Walmart (WMT, -11.4%) plunged after delivering a mixed quarterly report. Revenues improved 2.4% year-over-year to $141.6 billion to easily top expectations, and Walmart lifted its full-year sales outlook. However, that windfall is coming from cost-conscious consumers flocking to its grocery aisle, which has lower margins than its other offerings. This, as well as supply-chain problems and other headwinds, caused Walmart to report profits of $1.30 per share that were well short of estimates, and to lower its income forecast for 2022.

Home Depot (HD, +1.7%) fared better, however, after delivering record fiscal first-quarter sales and upgrading its full-year outlook. 

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“Walmart’s report this week basically confirmed all the negative scenarios that you would expect given inflationary pressures and rising interest rates,” says David Keller, chief market strategist at StockCharts.com. But he added that “Home Depot’s report had a much more encouraging tone as consumers fueled a strong earnings win for the company.”

Other pockets of strength Tuesday included airline stocks such as American Airlines (AAL, +7.7%) and Delta Air Lines (DAL, +6.7%), which were boosted by United Airlines’ (UAL, +7.9%) higher second-quarter revenue outlook. Semiconductor stocks including Micron Technology (MU, +5.7%) and Qualcomm (QCOM, +4.3%) also rallied around Piper Sandler’s upgrade of Advanced Micro Devices (AMD, +8.7%).

The Nasdaq Composite was tops among the major indexes Tuesday, up 2.8% to 11,984. The S&P 500 delivered a 2.0% gain to 4,088, while the Dow Jones Industrial Average improved 1.3% to 32,654.

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Other news in the stock market today:

  • The small-cap Russell 2000 surged 3.2% to 1,840.
  • U.S. crude oil futures slumped 1.6% to $112.40 per barrel.
  • A retreat in the U.S. dollar helped gold futures tick 0.3% higher to $1,818.90 per ounce.
  • Bitcoin improved by 1.7% to $30,058.48. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Twitter (TWTR, +2.5%) made some gains despite a potential deal with Tesla (TSLA, +5.1%) CEO Elon Musk looking increasingly unlikely. Musk insisted today that he would back out of his $44 billion bid to buy the social platform unless Twitter proved that fewer than 5% of its users are bots. He tweeted that “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher” without providing proof. Numerous analysts have now said they believe Musk’s sudden interest in Twitter’s bot numbers is either an attempt to escape his deal, or lower the $54.20-per-share price tag.

Buffett’s Latest Buys Are In!

A number of other stocks were driven higher Tuesday by their newfound inclusion into a prestigious order: the equity portfolio of Warren Buffett’s Berkshire Hathaway.

Berkshire filed its quarterly Form 13F with the SEC yesterday afternoon, revealing that after more than a year of heavy selling, Warren Buffett was finally eager to buy. Paramount Global (PARA, +15.4%) and Celanese (CE, +7.5%) were just two of the eight new positions Berkshire entered during the first quarter, and among the top beneficiaries of earning Buffett’s seal of approval.

We recently mentioned that inflation has been a major driver of many of Buffett’s purchases of the past few months, but it’s not the only story.

Read on as we explore each and every one of Buffett’s 22 moves from the first quarter of 2022, including what likely drew the Oracle of Omaha (or his lieutenants) to the position.

Kyle Woodley was long AMD as of this writing.

Source: kiplinger.com

Stock Market Today: Stocks Finish Lower as Traders Mull Recession Odds

The potential for the U.S. to slip into recession was the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.

Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS’ Face the Nation that recession was “a very, very high risk factor.” That opinion was met by a number of other calls Monday morning.

Wells Fargo Investment Institute, for instance, says “our conviction is that the chances of an outright recession in 2022 remain low” but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look – their global economists say “hard data” points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.

“There’s no crystal ball to predict what’s next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there’s only been two times in the past 60-plus years that the market didn’t fall into bear territory after a similar drop,” adds Chris Larkin, Managing Director of Trading at E*Trade. “This doesn’t mean it’s bound to happen, but there is room for potential downside.”

Larkin says to keep an eye on major retail earnings this week – which will kick off in earnest with Walmart’s Tuesday report – to get a pulse check on the American consumer.

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Monday itself was a fairly quiet affair. Exxon Mobil (XOM, +2.4%) and Chevron (CVX, +3.1%) were among a number of plays from the energy sector (+2.7%) that popped after U.S. crude oil futures jumped another 3.4% to $114.20 per barrel.

Twitter (TWTR, -8.2%) shares dropped after Tesla (TSLA, -5.9%) CEO Elon Musk spent the weekend questioning how much of Twitter’s traffic comes from bots. Wedbush analyst Daniel Ives said the move feels more like a “‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.” TWTR stock has now given up all its gains since Musk announced his stake in the social platform.

The major indexes finished an up-and-down session with mostly weak results. The Dow Jones Industrial Average managed to eke out a marginal gain to 32,223, but the S&P 500 declined 0.4% to 4,008, while the Nasdaq Composite retreated 1.2% to 11,662.

Also worth noting: Warren Buffett’s Berkshire Hathaway will file its quarterly Form 13F soon. Check back here tonight as we examine what Buffett has been buying and selling. 

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Other news in the stock market today:

  • The small-cap Russell 2000 closed out the session with a 0.5% dip to 1,783.
  • Gold futures gained 0.3% to settle at $1,814 an ounce.
  • Bitcoin was off 1.6% to $29,551.92 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • JetBlue Airways (JBLU, -6.1%) ramped up its hostile takeover attempt of Spirit Airlines (SAVE, +13.5%) on Monday, urging SAVE shareholders to vote against a buyout offer from fellow low-cost air carrier Frontier Group Holdings (ULCC, +5.9%). JBLU last month offered to buy Spirit Airlines for $33 per share – a premium to the $21.50 per share ULCC offered in February – but SAVE’s board of directors rejected the bid citing concerns over regulatory approval. JBLU followed up in early May with an “enhanced superior proposal,” including paying a $200 million, or $1.80 per SAVE share, reverse break-up fee should regulators block the deal.
  • Warby Parker (WRBY) fell 5.3% after the eyeglass maker reported a loss of 30 cents per share in its first quarter. This was much wider than the per-share loss of 3 cents the company reported in the year-ago period and missed the consensus estimate for breakeven on a per-share basis. Revenue of $153.2 million also fell short of analysts’ expectations. WRBY did maintain its full-year revenue guidance of $650 million to $660 million. “We remain cautiously optimistic on shares as WRBY continues to show ability to grow the top line, open new stores, and is recession resistant as a lower cost option for non-discretionary spend,” says CFRA Research analyst Zachary Warring (Buy). “We see the company leveraging SG&A to become profitable in the second half of 2022.”

Check Out Europe’s Dividend Royalty

If you’re seeking out more stable opportunities amid an uncertain U.S. market … well, the rest of the world is admittedly looking pretty shaky, too. But that doesn’t mean there aren’t a few morsels worth a nibble. 

BCA Research notes that while there’s negative news around the globe, “European benchmarks already discount a significant portion of the negative news.” And looking ahead, inflation there is expected to peak over the summer “as the commodity impulse is decelerating” – that should help stagflation fears recede and help European shares.

Graham Secker, Morgan Stanley’s chief European and U.K. equity strategist, chimes in that his firm remains “overweight [European] stocks offering a high and secure dividend yield.”

We’ve previously highlighted our favorite European dividend stocks, which on the whole tend to produce higher yields than their U.S. counterparts.

But we’d also like to shine the spotlight on Europe’s twist on an American income club: the Dividend Aristocrats. The S&P Europe 350 Dividend Aristocrats have somewhat different qualifications than their U.S. brethren, but in general, they’ve proven their ability to provide stable and growing dividends over time.

Read on as we look at the European Dividend Aristocrats.

Source: kiplinger.com

Is Recession Coming? Watch These Signs

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By Andrey Burmakin / Shutterstock.com

There’s no time stamp on when recessions pop up, or how long they last. Our last recession was two months long at the onset of the COVID-19 pandemic in 2020, making it the shortest on record.

The one before that was the Great Recession starting in 2007 and lasting 18 months, the longest downturn since World War II.

If the stock market and economy are keeping you on the edge of your seat, you can look for signs of a recession before it hits. That can help you determine whether you should start preparing for a recession, and the act of getting your finances ready for a possible downturn should give you some peace of mind.

An inexact science

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Stock-Asso / Shutterstock.com

Before we dive into the possible warning signs of a recession, it’s worth noting that predicting a recession is not an exact science.

So, while the following warning signs historically have served as indicators that a recession might be on the horizon, that doesn’t mean they are foolproof. The economy is dynamic, and there is no list of indicators that have preceded every past recession.

Still, the following indicators tend to be a good place to start looking if you’re worried about whether a recession lies ahead.

Sign No. 1: The yield curve inverts

Positive yield curve
hafakot / Shutterstock.com

Typically, long-term bonds pay more than short-term bonds, as illustrated above. This makes sense: If you agree to tie up your money for longer periods, you should be paid more for your trouble. This is why a five-year certificate of deposit (CD) pays more than a one-year CD.

Rarely, however, the reverse is true: Long-term bonds start paying less than short-term bonds. When that happens, a recession often follows. In fact, this situation, known as an inverted or negative yield curve, has proven a highly accurate recession predictor.

Why would long-term bonds ever pay less than short-term bonds? The nation’s central bank, the Federal Reserve — or “the Fed” for short — controls short-term rates, but the market controls the rates on longer-term securities.

The Fed can raise short-term rates, which is exactly what they started doing in March 2022, for the first time since 2018. But if investors start thinking things don’t look so good in the economy, they keep their powder dry by buying long-term bonds. The more they buy and bid up the price, the lower the rates on these securities go.

The yield curve did dip into negative territory in late March 2022. It quickly recovered, but it’s worth noting that it was the first time the yield curve turned negative since 2019 and, before that, 2006.

What to watch: You can find Treasury yields on the U.S. Treasury Department’s website. CNBC also tracks in real time the spread, or difference, between the yields on two-year and 10-year Treasurys.

Sign No. 2: The Leading Economic Index slips

Jenga game at risk of slipping
88studio / Shutterstock.com

The Conference Board’s Leading Economic Index (LEI) is one predictor of global economic health. The Conference Board, a nonprofit research group, describes the index as one of “the key elements in an early warning system to signal peaks and troughs in the global business cycle,” with the LEI specifically anticipating turning points in the business cycle.

Monthly dips in the Leading Economic Index aren’t alarming. However, year-over-year drops in the benchmark have been followed by recessions in the past.

The LEI increased by 0.3% from February to March, and by 1.9% over the six months leading up to March, so there’s no reason for concern based on this indicator right now.

What to watch: Keep an eye on Conference Board press releases or media coverage of the index.

Sign No. 3: Interest rates rise

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Orhan Cam / Shutterstock.com

Government monetary policy can be another economic bellwether. We’ll explain what to watch, but first, a quick refresher on how it works.

The Federal Reserve influences the economy by using a couple of tools. One of those tools is control over short-term interest rates via the target federal funds rate. If the economy is in the doldrums, it can lower the federal funds rate to encourage consumers and businesses to borrow, buy and invest, which stimulates the economy. That’s why this rate was kept near zero for years following the Great Recession that began in December 2007.

On the other hand, if the economy is growing too fast, that can lead to rising prices, otherwise known as inflation. To cool things down, the Fed raises the federal funds rate, which serves to put the brakes on the economy by discouraging both consumers and businesses from borrowing and spending as much.

While interest rates don’t directly affect the stock market, if businesses have to pay more in interest, that hurts their profits, which will ultimately be reflected in a lower stock price.

Also, as rates rise, investors often sell stocks, driving prices lower. Why do they sell? Think about it: If you can earn high interest from insured bank accounts or guaranteed Treasury bonds, why take a chance on stocks?

Again, the Fed resumed raising the federal funds rate in March 2022, marking the first rate hike since 2018. The hike in May — a half-point — was the largest increase since 2000.

What to watch: The Federal Reserve’s Federal Open Market Committee posts statements, which include any votes to change the federal funds rate, after each of its regularly scheduled meetings. The meetings are also widely covered by the financial media.

Sign No. 4: Consumer sentiment falls

Upset shopper at a grocery store
C.Snooprock / Shutterstock.com

Another economic indicator published by the Conference Board, the Consumer Confidence Survey, monitors everything from Americans’ buying intentions and vacation plans to their expectations for inflation, stock prices and interest rates.

After an uptick in March, consumer confidence fell slightly in April. The Consumer Confidence Index was at 107.3 for the month, down from 107.6. During the recession at the beginning of the COVID-19 pandemic, the index was less than 90.

Fluctuation is normal, especially as economic conditions shift. The pandemic, the rising costs of products and the war in Ukraine can change how people feel about the economy from month to month. But if consumer confidence continues to drop, that could be a sign of a looming recession.

What to watch: The Consumer Confidence Survey is updated monthly. Track press releases for it on the Conference Board’s website. The survey is also widely covered in the media.

Sign No. 5: Business confidence cools

Upset businessman holding his head at his computer
Rido / Shutterstock.com

Like consumer confidence, business confidence can shed light on the direction of the economy.

The Conference Board’s Measure of CEO Confidence remained in positive territory — 57 — in the first quarter of 2022. (The board considers measures of more than 50 points as positive, and lower readings as negative.) But this measure marked the third consecutive quarter of decline.

CEOs’ assessment of the current general economic conditions, and their expectations for the near future, also declined.

The outlook of small-business owners isn’t any rosier, according to the National Federation of Independent Business’ Small Business Optimism Index.

In March, inflation overtook labor quality as the top problem among small businesses. In fact, the share of owners raising their average selling prices reached its highest level in the survey’s 48-year history.

Moreover, the share of owners who expect better business conditions over the next six months fell to its lowest level in the survey’s history.

What to watch: Business confidence gauges like the Measure of CEO Confidence and CFO Survey are updated quarterly. The Small Business Optimism Index is updated monthly.

Sign No. 6: Vanguard’s risk forecast worsens

Vangaurd
Casimiro PT / Shutterstock.com

Vanguard is one of the biggest asset management firms in the world, so its economic outlooks can help paint a picture of how to monitor fluctuation in the economy.

Before the recession that started in late 2007, Vanguard’s six-month forecast had said the probability of a recession in six months was greater than 40%, according to The New York Times.

The firm’s forecast for 2022 — subtitled “Striking a better balance” — was overall optimistic, if cautiously so:

“While the economic recovery is expected to continue through 2022, the easy gains in growth from rebounding activity are behind us. We expect growth in both the U.S. and the euro area to slow down to 4% in 2022.”

In March, however, Vanguard downgraded its 2022 estimated growth for the U.S. from 4% to 3.5% — which is where it remained going into May.

What to watch: Vanguard posts its monthly market perspectives on its “Our Insights” webpage and issues press releases about its annual outlooks.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Stock Market Today: Stocks Paper Over Lousy Week With Wild Friday

Wall Street spent most of Friday applying some vibrant lipstick to what was otherwise a pig of a week for investors.

A broad market rally – one that saw each of the S&P 500’s 11 sectors finish higher – wasn’t a response to any new positive catalysts. Quarterly reports were light today, with most investors flipping the earnings calendar to next week’s retail-heavy slate.

And Friday’s most noteworthy datapoint was the University of Michigan’s latest consumer sentiment index reading, which dropped from 65.2 in April to 59.1 in May – a 10-year nadir that was well lower than the 64.1 reading expected.

Sometimes the market just enjoys a relief rally.

“Following a week of heavy selling, but with inflationary pressures easing just at the margin, and the Fed still seemingly wedded to 50-basis-point hikes for each of the next two FOMC meetings, the market was poised for the kind of strong rally endemic to bear market rallies,” says Quincy Krosby, chief equity strategist for LPL Financial.

He adds that given the Federal Reserve is only at the beginning of its rate-hike cycle and would like to see demand pull back further, “this rally will most likely weaken.”

Of course, even if this is just a pause before more market declines, investors don’t necessarily have to time the bottom to buy in at a decent valuation.

“This is still an attractive entry point, as we do not believe this is 1999/2000,” says Nancy Tengler, CEO and CIO of asset management firm Laffer Tengler Investments.

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The buying was strongest in consumer discretionary stocks (+3.9%) such as Amazon.com (AMZN, +5.7%) and Tesla (TSLA, +5.7%), along with technology plays (+3.3%) including Nvidia (NVDA, +9.5%) and Advanced Micro Devices (AMD, +9.3%).

Energy (+3.4%) was also bid higher amid a big pop in oil; U.S. crude futures finished 4.1% higher to $110.49 per barrel, helping to spark new highs in gasoline futures prices.

Notably absent from the rally was Twitter (TWTR, -9.7%), which sank after Elon Musk tweeted that the deal was “temporarily on hold.” 

All the major indexes put up spectacular gains Friday, though for the week, it was still losses all around: The Nasdaq Composite (+3.8% to 11,805) still finished off 2.8% for the week, the S&P 500 (+2.4% to 4,023) was down 2.4% across the five days, and the Dow Jones Industrial Average (+1.5% to 32,196) closed the week 2.1% in the red.

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Other news in the stock market today:

  • The small-cap Russell 2000 bounced 3.1% to 1,792.
  • Gold futures had no such luck. The yellow metal was off 0.9% to a 14-week low of $1,808.20 per ounce.
  • Bitcoin snapped back 5.1% to $30,034.99. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

Keep Your Guard Up Against Inflation

Inflation is prevalent virtually everywhere – including on corporate America’s earnings calls.

We’re most of the way through the first-quarter earnings season, and over the past few months, publicly traded companies keep repeating the “I” word as they discussed their most recent financial results.

FactSet used its Document Search technology to track mentions of the term “inflation” on corporate earnings calls, According to their senior earnings analyst, John Butters, of the 455 S&P 500 companies that have conducted earnings conference calls from March 15 through May 12, “377 have cited the term ‘inflation’ … which is well above the five-year average of 155.”

In fact, this is the highest overall number of S&P 500 companies citing inflation on their calls going back to at least 210. (The previous record? 356 … in the final quarter of 2021.)

It’s another signal that inflation continues to be a persistent problem – and with forecasts calling for still-high inflation to come, more active investors might do well to pack a little more protection. We’ve previously analyzed other ways to stay in front of inflation, such as stocks with pricing power and inflation-fighting funds.

Today, we look at another batch of investments that can help harness high inflation, with a focus on commodities, real estate and other areas of the market.

Kyle Woodley was long AMD, AMZN and NVDA as of this writing.

Source: kiplinger.com

Could Musk’s Twitter Buyout Hit the Skids?

Anyone who expected turbulence amid Elon Musk’s quest to acquire Twitter (TWTR) got precisely what they anticipated Friday morning, when the Tesla (TSLA) CEO tweeted that the Twitter deal was “temporarily on hold.”

TWTR shares plunged roughly 15% in Friday’s premarket trade following Musk’s tweet, which linked to a May 2 Reuters story about Twitter’s recent statement that “the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our [monetizable daily active users] during the quarter.”

Musk later tweeted that he is “still committed to acquisition,” which helped cut into the losses somewhat, though another seed of doubt was already sown. 

“[Musk] is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site,” says Susannah Streeter, senior investment and markets analyst for U.K. firm Hargreaves Lansdown.

But she also raises the possibility of an ulterior motive.

“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover,” Streeter says. “The $44 billion price tag [of the Twitter deal] is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”

That price tag might seem like even more of a stretch now than when Musk first got involved with Twitter.

“I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced,” Musk said in April when he declared his bid for the social media platform.

Since then, the S&P 500 and the communication services sector have both declined by double digits, with many high-priced technology and tech-esque shares plunging precipitously.

Twitter, to be fair, is roughly flat since then. But this latest hurdle puts his once seemingly imminent Twitter deal even further in doubt among investors and analysts alike.

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The market has yet to price TWTR shares at the $54.20 per share Musk offered in April. Not even after Musk revealed earlier this month that backers such as Andreessen Horowitz, Sequoia Capital and Oracle (ORCL) founder Larry Ellison were lined up to help provide more than $7 billion in financing.

As of Thursday’s close, TWTR shares were trading 15% below Musk’s $54.20-per-share bid. In Friday’s premarket trade, that number was nearly 30%.

Wall Street’s pros appear mildly skeptical the Twitter deal closing, too. According to S&P Global Market Intelligence, the 27 analysts who currently cover Twitter have an average price target of $51.50 and collectively consider the stock a Hold.

Source: kiplinger.com

Stock Market Today: Stocks Try to Find Their Legs Ahead of CPI Report

Wall Street searched for stability Tuesday, with a couple of the major indexes able to muster some gains ahead of a vital inflation reading tomorrow.

The 10-year Treasury note, after touching 3.2% yesterday, pulled back below the 3% threshold to as low as 2.94%. This retreat in interest rates removed some pressure from growthier stocks (which had been pummeled Monday), with technology (+1.5%) firms leading the session’s relief rally. Semiconductor stocks such as Nvidia (NVDA, +3.8%), Broadcom (AVGO, +3.3%) and NXP Semiconductor (NXPI, +3.2%) were among the day’s notable risers.

It wasn’t all roses, though. Investors continued to punish once-hot companies showing any signs of weakness.

For instance, artificial-intelligence lending-platform maker Upstart Holdings (UPST) plunged 56.4% to trade around all-time lows. While it beat Street estimates for first-quarter earnings, the company reduced full-year revenue forecasts to $1.25 billion from $1.4 billion previously.

Work-from-home darling Peloton Interactive (PTON, -8.7%) continued its fall from grace after reporting a 15% year-over-year decline in sales, a $757 million net loss and a dwindling cash pile that CEO Barry McCarthy said left the company “thinly capitalized.”

Even AMC Entertainment (AMC, -5.4%) was knocked lower despite a pretty encouraging report in which Batman and Spider-Man films helped the theater company to report a narrower-than-expected quarterly loss.

Still, the major indexes showed some strength. The Nasdaq Composite rebounded 1.0% to 11,737, while the S&P 500 improved 0.3% to 4,001. The Dow Jones Industrial Average brought up the rear, declining 0.3% to 32,160.

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“Markets are clearly confused about what the Fed will do this year and just how aggressive it will get. That can be seen in the volatility in expectations for where the Fed funds rate will be at the end of 2022, as seen in Fed funds futures,” says Invesco Chief Global Market Strategist Kristina Hooper. “And it is reflected in stock market volatility, with the VIX above 30.”

The big story to watch tomorrow is the Bureau of Labor Statistics’ consumer price index (CPI) report for April. BlackRock, for one, expects 8.1% headline CPI growth and 6.0% core growth following 8.5% and 6.5% increases in March.

“A weaker-than-expected CPI report later this week could help turn the tide and see investors embrace risk assets once again,” says Brian Price, head of investment management for independent broker-dealer Commonwealth Financial Network.

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Other news in the stock market today:

  • The small-cap Russell 2000 slipped marginally to 1,761.
  • U.S. crude futures slipped below the $100 per-barrel mark, ending the day down 3.2% at $99.76 per barrel. 
  • Gold futures fell 0.9% to settle at $1,841 an ounce.
  • Bitcoin clawed out a 0.5% gain to $31,315.54. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Groupon (GRPN) slid 12.5% after the e-commerce marketplace swung to an adjusted loss of 80 cents per share in its first quarter, compared to a per-share profit of 25 cents in Q1 2021. GRPN also said revenue slid 41% year-over-year to $153.3 million, while global units sold slumped 29% to 12.7 million. The company gave soft current-quarter and full-year revenue guidance, as well. “The underperformance was driven by a weaker rebound in local following omicron impacts in January and February,” says Credit Suisse analyst Stephen Ju, who maintained a Neutral (Hold) rating on GRPN. “As merchants found themselves in a high demand/low capacity environment, they were not incentivized to leverage discounting. Furthermore, April local billings continue to trend at Q1 2022 (as a percentage of 2019) levels and latest trends suggest an elongated recovery path.”
  • Vroom’s (VRM) narrower-than-expected first-quarter loss sent shares up 32.4% today. In its first quarter, the online used auto dealer reported a per-share loss of 71 cents per share vs. a consensus estimate for a loss of $1.07 per share. Revenue of $923.8 million also came in higher than analysts had expected. VRM also announced a new business realignment plan for long-term growth that it anticipates will result in up to $165 million in cost savings through the rest of 2022. “Vroom is shifting to survival mode, understandably, swapping out more aggressive growth plans for a leaner, and potentially more profitable business model,” says Baird Equity Research analyst Colin Sebastian (Outperform). “Given the current market environment, and challenges in scaling up an ‘asset light’ online sales platform, we think this pivot makes sense.”

Stick to (Most Of) Your Guns

“More than anything, volatility is a test of investor mettle.” So says Ross Mayfield, investment strategy analyst at research firm Baird, who notes that while we’re often told volatility is the price to pay in the stock market’s long-term gains, this glosses over the fact that volatility can take many forms.

“March 2020 featured a gut-wrenching drop, but also a relatively quick rebound. On the other end of the spectrum, markets are occasionally plagued by periods of high volatility that churn sideways relentlessly,” he says. “Each is challenging in its own way; holding through a big drop requires a steel stomach, but longer periods of frustrating volatility require real fortitude.”

While staying the course isn’t easy, you can at least make it less difficult on yourself by homing in on higher-quality investments with a longer-term focus. Stock investors might look to the Dow Jones’ top-rated components; fund investors should stick to well-managed products, such as these Vanguard funds commonly found in 401(k) plans.

But remember: Keeping a calm head doesn’t mean you shouldn’t ever sell in a downturn – on the contrary, the only thing worse than suffering losses in the first place is holding on to weak positions that will slather you in more red ink down the road. 

With that in mind, we’ve taken a look at some of Wall Street’s least favorite names at the moment. Remember: Sell calls are typically rare among the analyst community, so the fact that the pros are calling for more downside in these names, rather than saying to buy the dips, is noteworthy.

Check out Wall Street analysts’ list of stocks to sell right now.

Kyle Woodley was long NVDA as of this writing.

Source: kiplinger.com

Walt Disney (DIS) Earnings Expected to Surge as Theme Parks Pop

First-quarter earnings season keeps rolling on. Headlining this week’s earnings calendar will be entertainment giant Walt Disney (DIS, $110.71), oil name Occidental Petroleum (OXY, $62.97) and buy now, pay later company Affirm Holdings (AFRM, $25.04).

Through April 29, the percentage of S&P 500 companies reporting higher-than-expected earnings per share (80%) is above the five-year average (77%). However, the magnitude of the earnings beats (3.4%) is below the five-year average (8.9%), according to John Butters, senior earnings analyst at FactSet.

At the sector level, Butters says industrials and consumer staples have had the highest percentage of earnings beats at 91% and 89%, respectively. At the low end, real estate  and consumer discretionary have the smallest amount of companies reporting earnings above estimates at 63% apiece.

Can Earnings Give Walt Disney Stock a Boost?

Walt Disney will report its fiscal second-quarter earnings results after the May 11 close.

It has been a rough stretch for the Dow Jones stock, which is off more than 28% for the year-to-date, but another well-received earnings report could give DIS a boost.

In February, shares popped more than 3% after the company reported higher-than-expected earnings, revenue and Disney+ subscriptions.

Disney’s streaming service will be in focus this time around too, especially after Netflix (NFLX) stock sold off sharply when its latest earnings report showed the company’s first quarterly subscriber loss since 2011. However, unlike NFLX, Walt Disney “can monetize content through a variety of other channels, like merchandise and theme park revenue,” says David Trainer, CEO of Nashville-based investment research firm New Constructs.

And in addition to direct-to-consumer subscriber growth across Disney+, Hulu and ESPN+, which will help DIS stock outperform its peers, BofA Global Research analyst Jessica Reif Ehrlich says the company’s theme parks are on the upswing. 

“Despite achieving near record results in its fiscal first quarter, international visitors still represent a minimal percentage of total attendance, hotel room occupancy remains well below peak levels as all hotels have not been reopened yet, cruise ship capacity remains below pre-pandemic peaks and parks are still operating below peak capacity levels,” Reif writes in a note to clients. “These should all be additional tailwinds over the next 18-24 months.”

As for Disney’s fiscal second quarter, consensus estimates are for earnings per share (EPS) of $1.06, up 34.2% year-over-year (YoY) and revenue of $18.8 billion (+20.1% YoY).

Occidental Petroleum Earnings in Focus After Big Buffett Buy

Occidental Petroleum has been in the limelight in recent weeks following news that Warren Buffett’s Berkshire Hathaway (BRK.B) increased its stake in the energy stock. 

OXY first became a member of the Berkshire Hathaway equity portfolio in 2019, but the holding company more recently bought 91 million shares amid Buffett’s big spending spree.

The integrated oil and gas company will once again be in the spotlight when it unveils its first-quarter earnings results after Tuesday’s close.

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

OXY ended 2021 in a strong position, returning to profitability on an annual basis after two years of losses and recording its highest free cash flow – or the money available after a company has met its financial obligations – ever.

The company no longer resembles the debt-ridden firm of fiscal 2020 following its “record-shattering fiscal 2021,” says Raymond James analyst John Freeman (Strong Buy). 

“Leverage, which stood at around 4.8x at year-end 2020 – nearly double the Raymond James large-cap average – is estimated to fall below 1x by year-end 2022. The company, who remains completely unhedged in fiscal 2022, stands to generate a whopping $12.3 billion in free cash flow on our estimates of production of around 1.6 millions of barrels of oil equivalent per day (in-line with Street),” Freeman adds.

Underscoring this financial strength, analysts, on average, are expecting OXY to report earnings of $2.03 per share in Q1 versus a per-share loss of 15 cents in the year-ago period. Revenue is projected to jump 47.3% to $8.1 billion.

Affirm Selloff Creates Opportunity, Says Analyst

Affirm Holdings has not been immune to broad-market troubles in 2022, with shares down more than 75% for the year-to-date.

The reaction to the buy now, pay later (BNPL) stock’s mid-February earnings report – where AFRM shares slid nearly 21% the day after the results were released – only exacerbated these headwinds.

“AFRM has been pressured since reporting fiscal second-quarter results,” says Truist Securities analyst Andrew Jeffrey. This, according to Jeffrey, is due to a general multiple contraction, liquidity concerns and the perception of rising competition. 

However, the analyst, who has a Buy rating on AFRM stock, isn’t worried. While the recent selloff creates an opportunity, “rising BNPL demand, driven by changing consumer demographics and tastes, creates opportunity for several providers.” And secular demand for BNPL “will outpace any cyclical headwinds.”

So what’s in store for Affirm’s fiscal third-quarter earnings report, due out after Thursday’s close?

Consensus estimates are for the company to record a per-share loss of 53 cents for the three-month period, an improvement over the $1.06 per-share loss it reported in the year-ago period. Revenue, meanwhile, is expected to climb 73.6% YoY to $344.0 million.

Source: kiplinger.com

Walt Disney (DIS) Earnings Expected to Surge as Theme Parks Pop

First-quarter earnings season keeps rolling on. Headlining this week’s earnings calendar will be entertainment giant Walt Disney (DIS, $110.71), oil name Occidental Petroleum (OXY, $62.97) and buy now, pay later company Affirm Holdings (AFRM, $25.04).

Through April 29, the percentage of S&P 500 companies reporting higher-than-expected earnings per share (80%) is above the five-year average (77%). However, the magnitude of the earnings beats (3.4%) is below the five-year average (8.9%), according to John Butters, senior earnings analyst at FactSet.

At the sector level, Butters says industrials and consumer staples have had the highest percentage of earnings beats at 91% and 89%, respectively. At the low end, real estate  and consumer discretionary have the smallest amount of companies reporting earnings above estimates at 63% apiece.

Can Earnings Give Walt Disney Stock a Boost?

Walt Disney will report its fiscal second-quarter earnings results after the May 11 close.

It has been a rough stretch for the Dow Jones stock, which is off more than 28% for the year-to-date, but another well-received earnings report could give DIS a boost.

In February, shares popped more than 3% after the company reported higher-than-expected earnings, revenue and Disney+ subscriptions.

Disney’s streaming service will be in focus this time around too, especially after Netflix (NFLX) stock sold off sharply when its latest earnings report showed the company’s first quarterly subscriber loss since 2011. However, unlike NFLX, Walt Disney “can monetize content through a variety of other channels, like merchandise and theme park revenue,” says David Trainer, CEO of Nashville-based investment research firm New Constructs.

And in addition to direct-to-consumer subscriber growth across Disney+, Hulu and ESPN+, which will help DIS stock outperform its peers, BofA Global Research analyst Jessica Reif Ehrlich says the company’s theme parks are on the upswing. 

“Despite achieving near record results in its fiscal first quarter, international visitors still represent a minimal percentage of total attendance, hotel room occupancy remains well below peak levels as all hotels have not been reopened yet, cruise ship capacity remains below pre-pandemic peaks and parks are still operating below peak capacity levels,” Reif writes in a note to clients. “These should all be additional tailwinds over the next 18-24 months.”

As for Disney’s fiscal second quarter, consensus estimates are for earnings per share (EPS) of $1.06, up 34.2% year-over-year (YoY) and revenue of $18.8 billion (+20.1% YoY).

Occidental Petroleum Earnings in Focus After Big Buffett Buy

Occidental Petroleum has been in the limelight in recent weeks following news that Warren Buffett’s Berkshire Hathaway (BRK.B) increased its stake in the energy stock. 

OXY first became a member of the Berkshire Hathaway equity portfolio in 2019, but the holding company more recently bought 91 million shares amid Buffett’s big spending spree.

The integrated oil and gas company will once again be in the spotlight when it unveils its first-quarter earnings results after Tuesday’s close.

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

OXY ended 2021 in a strong position, returning to profitability on an annual basis after two years of losses and recording its highest free cash flow – or the money available after a company has met its financial obligations – ever.

The company no longer resembles the debt-ridden firm of fiscal 2020 following its “record-shattering fiscal 2021,” says Raymond James analyst John Freeman (Strong Buy). 

“Leverage, which stood at around 4.8x at year-end 2020 – nearly double the Raymond James large-cap average – is estimated to fall below 1x by year-end 2022. The company, who remains completely unhedged in fiscal 2022, stands to generate a whopping $12.3 billion in free cash flow on our estimates of production of around 1.6 millions of barrels of oil equivalent per day (in-line with Street),” Freeman adds.

Underscoring this financial strength, analysts, on average, are expecting OXY to report earnings of $2.03 per share in Q1 versus a per-share loss of 15 cents in the year-ago period. Revenue is projected to jump 47.3% to $8.1 billion.

Affirm Selloff Creates Opportunity, Says Analyst

Affirm Holdings has not been immune to broad-market troubles in 2022, with shares down more than 75% for the year-to-date.

The reaction to the buy now, pay later (BNPL) stock’s mid-February earnings report – where AFRM shares slid nearly 21% the day after the results were released – only exacerbated these headwinds.

“AFRM has been pressured since reporting fiscal second-quarter results,” says Truist Securities analyst Andrew Jeffrey. This, according to Jeffrey, is due to a general multiple contraction, liquidity concerns and the perception of rising competition. 

However, the analyst, who has a Buy rating on AFRM stock, isn’t worried. While the recent selloff creates an opportunity, “rising BNPL demand, driven by changing consumer demographics and tastes, creates opportunity for several providers.” And secular demand for BNPL “will outpace any cyclical headwinds.”

So what’s in store for Affirm’s fiscal third-quarter earnings report, due out after Thursday’s close?

Consensus estimates are for the company to record a per-share loss of 53 cents for the three-month period, an improvement over the $1.06 per-share loss it reported in the year-ago period. Revenue, meanwhile, is expected to climb 73.6% YoY to $344.0 million.

Source: kiplinger.com

Stock Market Today: Stocks Suffer Worst Losses of 2022

The major indexes wiped out yesterday’s relief-rally gains and then some Thursday in a market-wide rout as Wall Street took a more sober look at the investing landscape.

For one, most of the worries hanging over stocks haven’t disappeared, including on the interest-rate front. While Federal Reserve Chair Jerome Powell did dismiss the idea of a 75-basis-point hike yesterday, the expectation is for at least two more 50-basis-point hikes at the next two Federal Open Market Committee meetings – a still-considerable level of monetary tightening.

“We are still not out of the woods yet, as there is still too much uncertainty over how the Federal Reserve’s actions will tame inflation without causing a recession,” says Zach Stein, chief investment officer of climate change-focused investment manager Carbon Collective.

Indeed, the yield on the 10-year Treasury, which retreated yesterday, roared back to life Thursday to eclipse 3% once more. That weighed particularly hard on rate-sensitive growth places in tech and tech-esque stocks such as mega-caps Tesla (TSLA, -8.3%), Nvidia (NVDA, -7.3%) and Apple (AAPL, -5.6%).

Speculative assets such as cryptocurrency went heavily risk-off, too; Bitcoin, for instance, plunged 8.9% to $36,287. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

Gene Goldman, chief investment officer of Cetera Investment Management, pointed to additional drivers for Thursday’s woes.

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“There is less optimism around the less hawkish Fed and the softish landing scenario,” he says. “We saw data this morning portraying more inflation and a weaker economy – labor costs surged in Q1, unemployment claims rose, and productivity was weaker than expected.”

Goldman also pointed to disappointing earnings reports from the e-commerce industry, which, because of high valuations to boot, were selling off particularly hard.

Shopify (SHOP), for one, plunged 14.9% after the e-commerce company reported lower-than-expected adjusted earnings and revenue in its first quarter (20 cents vs. 63 cents est.; $1.2 billion vs. $1.24 billion est.) and projected soft revenue guidance in the first half amid tough comparisons. SHOP also said it will buy San Francisco-based fulfillment startup Deliverr for $2.1 billion.

“Although e-commerce growth was below our view, SHOP is lapping pandemic figures, with comparisons to get more favorable exiting the calendar year,” says CFRA Research analyst Angelo Zino (Hold). “That said, we do think consensus expectations will need to be tempered, partly reflecting lower than expected merchant additions to start the year.”

eBay (EBAY, -11.7%) spiraled lower despite topping first-quarter estimates after it forecast second-quarter revenues of $2.35 billion to $2.40 billion and adjusted earnings of 87 to 91 cents per share, both under expectations for $2.54 billion and $1.01 per share, respectively. Etsy (ETSY, -16.8%), meanwhile, slightly beat revenue expectations but was merely in-line on profits and forecast Q2 sales of $540 million to $590 million, falling far short of the $627 million analyst mark. Amazon.com (AMZN) bled 7.6% in sympathy.

The result was the worst single-session performance of 2022 for both the Nasdaq Composite (-5.0% to 12,317) and Dow Jones Industrial Average (-3.1% to 32,997), while the S&P 500 (-3.6% to 4,146) was just a hair shy of outdoing its marginally larger decline April 29.

stock chart for 050522stock chart for 050522

How low could we go from here?

Well, a bear market (a 20% drop from highs) would mean about 3,850 for the S&P 500, and John Lynch, chief investment officer for Comerica Wealth Management, thinks the index could scrape that figure.

“Bear markets without recession tend to be short and shallow,” Lynch says. “It’s conceivable the S&P 500 needs to establish a bottom in this 3,850 to 4,000 range. Without recession in 2022, which is our base case, stocks can resume higher as equity investors discount cyclical recovery in an environment where monetary policy is no longer shepherding expensive growth and technology names at a multiple of sales.”

Other news in the stock market today:

  • The small-cap Russell 2000 dropped 4.0% to 1,871.
  • U.S. crude oil futures eduged up 0.4% to settle at $1081.26 per barrel.
  • Gold futures gained 0.3% to finish at $1,875.70 an ounce.
  • Booking Holdings (BKNG) was a rare splash of green today, adding 3.3% after the online travel company reported earnings. In its first quarter, BKNG reported earnings of $3.90 per share on $2.7 billion in revenue, more than the 85 cents per share and $2.5 billion analysts were expecting. The company also posted gross bookings of $27.3 billion, a record quarterly amount. “We have a favorable view of online travel companies, and particularly of BKNG given its focus on Europe, where it generates most of its gross profit,” says Argus Research analyst John Staszak (Buy). “BKNG is trading at a projected 2022 price-to-earnings ratio of 20.2, below the average for other online booking companies; however, we believe that it merits a higher multiple given the company’s strong earnings outlook.”

Warren Buffett Splashes More Cash

Warren Buffett is spending like there’s no tomorrow. A Wednesday evening regulatory filing from Berkshire Hathaway (BRK.B, -2.5%) revealed that the Oracle of Omaha’s holding company bought $350 million shares in energy firm Occidental Petroleum (OXY, +1.2%). 

The Berkshire Hathaway equity portfolio has plumped up on Occidental exposure in recent months – Buffett revealed a nearly 10% OXY stake in early March that now sits at 15.2%, and he also owns $10 billion worth of 8% preferred stock, as well as 84 million warrants to purchase OXY stock. The move is part of Buffett’s renewed buying interest in energy that has seen Chevron (CVX) become Berkshire’s fourth-largest holding.

All of this falls under an even larger underlying theme, which is that Buffett has gone from being a voracious seller in 2021 to buying everything that isn’t tied down this year. Part of that seems to be the Oracle taking advantage of a considerable dip in the market. But a closer look at what Buffett’s buying signals that he, like the rest of us, has rapidly rising prices on the brain.

We recently talked to noted Buffett expert David Kass about the Berkshire CEO’s recent binge, and how much of Warren Buffett’s activity has been connected to inflation.

Source: kiplinger.com