MARKETS TODAY Oct 24 (Vica Partners) – The S&P 500 up 0.89% as of 1.10 p.m. Eastern. The Dow Jones Industrial Average up 338 points, or 1.09%, to 31,420. The tech based Nasdaq up 0.41%.
Stock indexes were mixed in morning trading and now all recovered in the late morning session, the 10-year Treasury is flat with a yield at 4.211%. U.S. Dollar Index (DXY) is also flat at $112.07. Oil prices flat with Brent crude $93.11, -0.42%, and US West Texas Intermediate $84.51, -0.63%.
MARKETS TODAY Oct 24 (Vica Partners) – The S&P 500 up 0.89% as of 1.10 p.m. Eastern. The Dow Jones Industrial Average up 338 points, or 1.09%, to 31,420. The tech based Nasdaq up 0.41%.
Stock indexes were mixed in morning trading and now all recovered in the late morning session, the 10-year Treasury is flat with a yield at 4.211%. U.S. Dollar Index (DXY) is also flat at $112.07. Oil prices flat with Brent crude $93.11, -0.42%, and US West Texas Intermediate $84.51, -0.63%.
Indexes gained last week on hopes that the Federal Reserve will temper rate hikes
The major averages had their biggest weekly gains since June, with the Dow advancing 4.9%. The S&P 500 +4.7% and Nasdaq rose 5.2%.
S&P U.S. manufacturing PMI (flash)
The headline Flash US PMI Composite Output Index registered 47.3 in October, down from 49.5 in September. With the exception of the initial pandemic period, the rate of decrease was the second-fastest since 2009.This is well below market forecasts of 51 and marking the sector’s first contraction since June of 2020
United States Services PMI
The S&P Global US Services PMI dropped to 46.6 in October 2022 from 49.3 in the previous month, and well below market forecasts of 49.2. The latest reading signaled the second-fastest fall in business activity in almost two-and-a-half years, due to weak client demand and the impact of inflation and higher interest rates.
On the company side…
Companies are starting to be rewarded for strong third quarter earnings
- Netflix (NFLX) which was trading up close to 18% after beating expectations for the top and bottom lines as well as in subscriber growth.
Earnings this week include Merck, Apple, Alphabet, Amazon and Microsoft
- Merck (MRK) remains a strong buy, today a 96.27 entry, following a bullish rally off the 200-day moving average of $86.16, +16.22.
- Merck reported strong second-quarter results in July when adjusted profit jumped 43% to $1.87 per share. Revenue increased 28% to $14.6 billion. In July Merck raised its full-year revenue guidance of $57.5 to $58.5 billion, up from $56.9 to $58.1 billion. Vica’s consensus estimate is for $1.70 per share, down 3.9% from a year-ago third quarter and revenue is expected to rise 7% to $14.06 billion.
- Vica sees third-quarter beat for Amazon, statistically they have reported high end of its guidance in 19 of the last 26 quarters. Do expect some cautionary 4th quarter guidance.
Fed set to raise rates by three-quarters of a point
Expect that Fed will raise rates by three-quarters of a point at the end of its meeting on Nov. 2. Try to ignore the headlines as the move has already been priced into the market and any daily pricing changes will bounce back.
IMPORTANT TO READ as low interest rates will return
The Federal Reserve will be forced to cut interest rates in 2023 if a deep recession occurs as the cure for inflation is not just raising rates. As we see a significant policy change coming by late Spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 5-7% valuation correction for speculative stocks. DON’T try to time market lows!
*** Watch for our emerging 90 day Sector and leading company watchlist’s
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and will regain strength shortly
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
The major averages had their biggest weekly gains since June, with the Dow advancing 4.9%. The S&P 500 +4.7% and Nasdaq rose 5.2%.
S&P U.S. manufacturing PMI (flash)
The headline Flash US PMI Composite Output Index registered 47.3 in October, down from 49.5 in September. With the exception of the initial pandemic period, the rate of decrease was the second-fastest since 2009.This is well below market forecasts of 51 and marking the sector’s first contraction since June of 2020
United States Services PMI
The S&P Global US Services PMI dropped to 46.6 in October 2022 from 49.3 in the previous month, and well below market forecasts of 49.2. The latest reading signaled the second-fastest fall in business activity in almost two-and-a-half years, due to weak client demand and the impact of inflation and higher interest rates.
On the company side…
Companies are starting to be rewarded for strong third quarter earnings
- Netflix (NFLX) which was trading up close to 18% after beating expectations for the top and bottom lines as well as in subscriber growth.
Earnings this week include Merck, Apple, Alphabet, Amazon and Microsoft
- Merck (MRK) remains a strong buy, today a 96.27 entry, following a bullish rally off the 200-day moving average. Merck reported strong second-quarter results in July when adjusted profit jumped 43% to $1.87 per share. Revenue increased 28% to $14.6 billion. In July Merck raised its full-year revenue guidance of $57.5 to $58.5 billion, up from $56.9 to $58.1 billion. Vica’s consensus estimate is for $1.70 per share, down 3.9% from a year-ago third quarter and revenue is expected to rise 7% to $14.06 billion.
- Vica sees third-quarter beat for Amazon, statistically they have reported high end of its guidance in 19 of the last 26 quarters. Do expect some cautionary 4th quarter guidance.
Fed set to raise rates by three-quarters of a point
Expect that Fed will raise rates by three-quarters of a point at the end of its meeting on Nov. 2. Try to ignore the headlines as the move has already been priced into the market and any daily pricing changes will bounce back.
IMPORTANT TO READ as low interest rates will return
The Federal Reserve will be forced to cut interest rates in 2023 if a deep recession occurs as the cure for inflation is not just raising rates. As we see a significant policy change coming by late Spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 5-7% valuation correction for speculative stocks. DON’T try to time market lows!
*** Watch for our emerging 90 day Sector and leading company watchlist’s
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and will regain strength shortly
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
