U.S. stocks, at midday, appear stable and are making some headway up. The major indices are up more than 1%. The mood is cautious. The start was helped by Japan's Nikkei which rose 10% overnight after the dramatic fall the day before. The U.S. is deep into earnings season and reports are driving individual stock moves. Overall, global markets continue to recalibrate.

Dividend income is often overlooked amid gyrations in the stock market. But dividends are an important element of return. Dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that's just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks. High-yield stocks typically have dividends that pay out in the 5%-8% range. Though the income appears attractive, the share prices of high-yield stocks may be at risk. Dividend-growth stocks typically have lower yields, often in the 1.0%-2.5% range. But the lower-yielding dividends are not likely to be a huge component of cash flow, leaving management teams with other value-additive options for deploying cash. Further, while the yields are not as high, management teams may be more likely to boost the payouts over time, as earnings grow.

Dividend income is often overlooked amid gyrations in the stock market. But dividends are an important element of return. Dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that's just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks. High-yield stocks typically have dividends that pay out in the 5%-8% range. Though the income appears attractive, the share prices of high-yield stocks may be at risk. Dividend-growth stocks typically have lower yields, often in the 1.0%-2.5% range. But the lower-yielding dividends are not likely to be a huge component of cash flow, leaving management teams with other value-additive options for deploying cash. Further, while the yields are not as high, management teams may be more likely to boost the payouts over time, as earnings grow.

U.S. stocks continue to trend higher as investors are not faced with major economic developments and can focus on earnings reports. Disney (DIS) was down more than 10% in midday trading after the company posted results that showed an overall loss, but adjusted profits that beat the consensus. It expects weaker results this quarter. Peloton (PTON) is up on reports that the company is in talks with private equity firms to buy out the company. The Dow is up 0.1%, and S&P 500 0.3% and the Nasdaq rose 0.2%. Crude oil is trading above $78 per barrel and gold fell $8 to $2323 per ounce.

In this edition, we explore strength of the refining market; transferring coverage of Motorola; and initiating coverage of BYD Electronic; and OrbusNeich, Jazz Pharmaceuticals, and Prudential Financial.

Stocks were mixed on Friday morning following the Labor Department's revision to the inflation data. After seasonal revisions to CPI, December's reading was revised down to 0.2% from the prior 0.3% increase. November's CPI was revised up from a 0.1% increase to 0.2% after the adjustment. The seasonal adjustments are made annually, coinciding with January's CPI release, to account for price movements in the previous year. The S&P 500 gained 0.2% and in intraday trading the index was above 5,000. The Dow is down $0.3% and the Nasdaq is up 0.9%. Crude oil is trading above $76 per barrel, while gold lost $10 to trade near $2038.

Dividend income is often overlooked amid gyrations in the stock market. But dividends are an important element of return. Dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that's just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks. High-yield stocks typically have dividends that pay out in the 5%-8% range. Though the income appears attractive, the share prices of high-yield stocks may be at risk. Dividend-growth stocks typically have lower yields, often in the 1.0%-2.5% range. But the lower-yielding dividends are not likely to be a huge component of cash flow, leaving management teams with other value-additive options for deploying cash. Further, while the yields are not as high, management teams may be more likely to boost the payouts over time, as earnings grow.

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The third-quarter earnings season is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a 6.3% gain, year-over-year, according to Refinitiv. That is considerably better than the 1.0% expected at the start of the earnings period, and should be enough to end the "earnings recession" that investors have endured over the past three quarters. Propelling the 3Q outperformance were strong gains in Communication Services, up 46%, while Energy again (like last quarter) is performing the worst, down 33%. Our analysts are always on the lookout for companies that boost their outlooks during earnings season. Here is an initial list of BUY-rated companies in Argus Coverage at which management raised guidance or increased its outlook during the 3Q23 EPS reporting season.

Stocks edged higher on Monday morning, extending last week's gains amid optimism about an end to Fed rate hikes. Investors weighed earnings reports from Berkshire Hathaway and Dish Network and awaited results from Disney later in the week. Tesla also announced plans to build a relatively low-cost electric car at its plant in Germany. The Dow rose 0.2%, the S&P 0.1%, and the Nasdaq 0.1%. Crude oil rose more than 1% to $81.50 per barrel while gold fell $9 to trade near $1990 per ounce.

Quantitative, fundamental, and technical analysis offer valuable and ongoing insights on which many investors reply. But so-called 'black swan' events disrupt all of that as they push everything else to the side and steal the headlines (and the trading action) for as long as they do. To date, 2023 has been a good year for those who invest in stocks. But last week, not so much after Fitch surprised the investing world with a downgrade of U.S. debt.

Short term measures of market breadth have oscillated below overbought levels and above oversold readings since early April. In other words, we are not seeing breadth exhibit a whole lot of strength or weakness recently. For instance, the McClellan Oscillator, a breadth indicator using advances and declines on the NYSE, has been stuck between -60 and +77 in recent months. Overbought or strong breadth readings are at least +100 and weak breadth would be -100 or lower.

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.

Stocks fell on Monday morning, giving back some of Friday's gains amid deepening debt-ceiling concerns. Treasury Secretary Janet Yellen recently warned that the United States could default on its debt by June 1, sooner than initially expected, if Congress does not act. Investors also looked ahead to the April CPI report on Wednesday for signs of progress in the battle against inflation. The Dow fell 0.3%, the S&P 0.1%, and the Nasdaq 0.3%. Crude oil rose more than 2% to $73 per barrel while gold rose $7 to $2032 per ounce.

Stocks fluctuated in volatile trading on Friday morning as investors weighed a new round of earnings reports and monthly consumer sentiment data. The University of Michigan said that its preliminary consumer sentiment index for February rose to 66.4, up from 64.9 in January and above the Reuters consensus forecast of 65.0. However, the inflation expectations reading was higher. The February survey reported that consumers expected prices to rise 4.2% over the next year, up from 3.9% in January. The Dow rose 0.4%, the S&P rose 0.1%, and the Nasdaq fell 0.7%. Crude oil rose 2% to $79.50 per barrel, while gold fell $6 to $1872 per ounce.

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.

Monday Tee Up: Inflation, Midterms, Earnings

Monday Tee-Up: Key Inflation Data, CPI & PPI

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.

Looking for a Bottom

With the majority of companies having reported fourth-quarter earnings, the volume of weekly insider transactions is returning to normal. Almost 1200 insider buy and sell orders met the criteria for inclusion in the latest Weekly Insider Report from Vickers Stock Research. Still, the current level of activity falls short of the robust volumes at this point in the third-quarter earnings-release cycle -- when more than 2100 trades were placed.

ESG (Environmental, Social, Governance) investing continues to grow. According to Opimas, a management consultancy focused on global capital markets, global assets under management in ESG strategies had grown to $40.5 trillion in 2020, doubling in four years and tripling in eight years. 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. For our part, 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 following 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 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. Environment, and Shareholders. JUST ESG Custom Ratings rank stocks in the Russell 1000 on these 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 have lists focused on the top companies in each sector, as well as lists of companies that score well on certain financial metrics, such as yield, beta, value, and momentum. 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.

Sustainable Impact Investing is gaining traction with the global investment community. In January 2020, BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced 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. But the 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.

Vickers Stock Research, a subsidiary of Argus Research Group, tracks and analyzes insider trading and institutional ownership trends. Form 13-Fs are due 45 days after the end of calendar quarters, and have now come in from 2Q21. We like to review the 13Fs of the major activist investors, including Carl Icahn, Trian Fund Management, Jana Partners, and ValueAct Holdings, among others. Activist investing has evolved in recent years and is now less about generating a short-term return on an underpriced stock and more about achieving long-term returns through an active management/investor partnership. Here are some recent new purchases and key holdings of activist investors, according to Vickers.

Is This the Corner?

What happened to the September sell-off? A month ago, the S&P 500 was in the process of falling off all-time highs set early in September. From the ATH of 4,537 on 9/2/21, the "500" fell to the 4,350s on 9/21/21; staged what would be a failed rally to just under 4,450 on 9/24/21; and then made twin lows right around 4,300 on 9/30/21 and 10/4/21.

Last week, we detailed positive trends in insider sentiment, even in the face of light transaction volume (the result of trading restrictions during earnings season). This week, Vickers Stock Research reports that insider transaction volume has started to increase as earnings season comes to a close. Broadly put, the positive short-term trends from last week have not held, though the current data is not bad enough to damage longer-term trends.

July ended with a bout of selling, but bulls considered it overdue profit-taking after another successful month. Even with Friday's washout, the S&P 500 rose 2.3% in July. That marked six straight months of appreciation for the blue chip index (only January has been negative in 2021) and was the best market month since April.

Last week was all about jobs, as the market overcame its growing inflation concerns to rally on three employment data points clustered at the end of the week. The ADP private payrolls report (moved to Thursday by the holiday) ripped higher by 978,000 for May, well above the 650K consensus and up from 742K for April.

As we do each week, we'll offer an update on the ongoing trends in insider-sentiment data from Vickers Stock Research, while also pulling out new insights gleaned from the weekly data.

Stocks rose again on Monday morning, continuing their recent rally, amid optimism about federal stimulus spending, the ongoing vaccine rollout, and the decline in new U.S. coronavirus cases. Prior to the open, 59% of S&P 500 companies had reported 4Q earnings, according to FactSet, and 81% of these companies had topped expectations. The Dow rose 0.4%, the S&P 0.3%, and the Nasdaq 0.4%. Crude oil traded near $58 per barrel, while gold rose $26 to $1839 per ounce.

After three consecutive weeks of surprisingly bearish results, insider sentiment has returned to benign levels. Let's review the data.

Volume is now returning to the weekly data from Vickers Stock Research. After a lull during earnings season, when corporate executives, directors and beneficial owners were broadly prohibited from trading, the volume of insider transactions has started to move higher again. This week, some 1423 transactions met the criteria for inclusion in the Weekly Insider Report. That compares to a weekly average of 728 transactions for the last six weeks. As such, the signals thrown off by insiders are now more meaningful. So, what are those signals?

Volume is now returning to the weekly data from Vickers Stock Research. After a lull during earnings season, when corporate executives, directors and beneficial owners were broadly prohibited from trading, the volume of insider transactions has started to move higher again. This week, some 1423 transactions met the criteria for inclusion in the Weekly Insider Report. That compares to a weekly average of 728 transactions for the last six weeks. As such, the signals thrown off by insiders are now more meaningful. So, what are those signals?

Stocks fell on Friday morning following a sharp drop in U.S. retail sales. The Commerce Department said that sales plunged 16.4% in April. This followed an 8.3% decline in March and exceeded the Reuters consensus forecast, which had called for a decline of 12.0%. Meanwhile, the House prepared to vote on a new $3 trillion relief package that would include direct support for state governments and additional payments to individuals; however, Senate Republicans have promised to reject the measure. The S&P fell 1.0%, the Dow 1.0%, and the Nasdaq 1.1%. Crude oil rose 4% to more than $28 per barrel, while gold rose $8 to $1749 per ounce.

Stocks fell on Friday morning following a sharp drop in U.S. retail sales. The Commerce Department said that sales plunged 16.4% in April. This followed an 8.3% decline in March and exceeded the Reuters consensus forecast, which had called for a decline of 12.0%. Meanwhile, the House prepared to vote on a new $3 trillion relief package that would include direct support for state governments and additional payments to individuals; however, Senate Republicans have promised to reject the measure. The S&P fell 1.0%, the Dow 1.0%, and the Nasdaq 1.1%. Crude oil rose 4% to more than $28 per barrel, while gold rose $8 to $1749 per ounce.

The Technology sector has led the market recovery from the COVID-19 depths of late March. Through April 30, the sector was flat for the year, compared to a 10% decline for the S&P 500. The sector is the largest in the U.S. market and now accounts for almost 26% 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 rating 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 Technology sector has led the market recovery from the COVID-19 depths of late March. Through April 30, the sector was flat for the year, compared to a 10% decline for the S&P 500. The sector is the largest in the U.S. market and now accounts for almost 26% 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 rating 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.

Our proprietary Treasury Note Yield Model is signaling that bond yields, which are near all-time lows as investors flock to safety during the global health crisis, are too low based on the fundamentals (though not necessarily on sentiment). Our model discounts factors such as current yields, GDP growth and long-term inflation, as well as stock prices and earnings. We smooth trends out over a five-year period in order to avoid being caught in short-term momentum swings. Our current 10-year T-bond fair value yield is 3.10%. The normal valuation range has a floor of 1.8% and a ceiling of 4.4%. The current 10-year bond yield is around 0.9%, below the low end of the fundamental range and far below fair value. From an asset-allocation standpoint, we think bonds remain fully valued compared to stocks and recommend that long-term investors under-weight fixed-income securities in their diversified portfolios (our base Asset Allocation model has a 40% weight to bonds). Within fixed-income, investors have options ranging from government to corporate to foreign to asset-backed securities, among others. We favor short-term U.S. Treasuries for the core of a portfolio, as well as mortgage-backed securities, which the Federal Reserve has said it will buy.

Our proprietary Treasury Note Yield Model is signaling that bond yields, which are near all-time lows as investors flock to safety during the global health crisis, are too low based on the fundamentals (though not necessarily on sentiment). Our model discounts factors such as current yields, GDP growth and long-term inflation, as well as stock prices and earnings. We smooth trends out over a five-year period in order to avoid being caught in short-term momentum swings. Our current 10-year T-bond fair value yield is 3.10%. The normal valuation range has a floor of 1.8% and a ceiling of 4.4%. The current 10-year bond yield is around 0.9%, below the low end of the fundamental range and far below fair value. From an asset-allocation standpoint, we think bonds remain fully valued compared to stocks and recommend that long-term investors under-weight fixed-income securities in their diversified portfolios (our base Asset Allocation model has a 40% weight to bonds). Within fixed-income, investors have options ranging from government to corporate to foreign to asset-backed securities, among others. We favor short-term U.S. Treasuries for the core of a portfolio, as well as mortgage-backed securities, which the Federal Reserve has said it will buy.