Key inflation data is coming this week and AI superstar Nvidia reports earnings. Wall Street will continue to absorb comments from Fed Chairman Jerome Powell from last week, noting that the Fed is ready to start easing monetary policy. The Dow Jones Industrial Average ended last week up 1.3%, the S&P 500 gained 1.5%, and the Nasdaq was higher by 1.4%. Year to date, the DJIA is higher by 9%, the S&P is up 18%, and the Nasdaq has popped 19%. On the economic calendar, inflation data via PCE is the highlight of the week, to be reported on Friday. In June, the PCE (Personal Consumption Expenditures) came in at 2.5%. We see that bumping up slightly to 2.6%. Core PCE came in at 2.6% for June. We see no change for July. Elsewhere, Durable Goods Orders will be reported on Monday. On Tuesday, the Case-Shiller Home Price Index and Consumer Confidence hit the tape, and on Thursday, GDP will be updated. Several Fed officials speak throughout the week. The earnings calendar is winding down, but some important reports remain. On Wednesday, Nvidia, Salesforce, CrowdStrike, HP, and J.M. Smucker all report. Aside from Nvidia's data, analysts will be listening to hear what CrowdStrike management has to say about the global software glitch last month and the impact on business. On Thursday, reports come from Dell, Marvell Technology, Best Buy, Lululemon, Gap, and Ulta Beauty. Earnings are coming in 12.7% higher this quarter than a year ago. Some 95% of S&P 500 companies have reported so far. Financials and Healthcare are the leading sectors, both up 20% for the quarter compared to the same quarter last year. Materials are on the other end, down 6%. Expectations were for 8%-12% earnings growth for 2Q, so corporate America has again surpassed the initial forecast. Mortgage rates fell three basis points (bps) to 6.46% for the average 30-year fixed-rate mortgage. Gas prices fell three cents to $3.38 per gallon for the average price of regular gas. The Atlanta Fed GDPNow indicator is forecasting for 3Q and calls for expansion of 2.0%. The Cleveland Fed CPINow indicator forecasts 2.6% for August CPI. Looking ahead, the next Fed rate decision comes on September 18, with odds at 100% for a rate cut. Of that, 63% expect a 25-bps cut and 37% a 50-bps cut. There are then two more Fed rate meetings this year, the first on November 7 and the second on December 18. We now expect three rate cuts this year, for a total of 75 bps. We see two rate cuts in 2025. We see all cuts in the size of 25 bps.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

The stock market in May has shrugged off a difficult April. But even with the strong 'buy the dip' reversal, investors are anything but confident in the market's advance, given some shaky economic underpinnings. Inflation continues to weigh not just on consumers' thinking but more than ever on their large-ticket and discretionary purchases. Both of the most recent quarterly GDP and nonfarm payrolls reports represented a step down from prior readings. Cooling in the economy provided the Fed cover for its first rate cut of the current cycle. Yet the language from Fed officials seems to signal that the central bank is in no hurry to begin cutting rates. The election, and not just the presidential election, is moving into its mean season; the fraught and angry partisanship can weigh on consumer behavior and investor confidence. Despite these and other challenges, the bull has pressed on. Historically, bull markets have successfully climbed walls of worry, many more formidable than the current one. But investors need to remain confident this bull still has legs. The Market as of End of May The market would not be up if the outlook was all gloom. Corporate earnings continue to outperform expectations, which along with declining rates of inflation is preventing a rising market from appearing overvalued. GDP growth was subpar in 1Q24, but it was positive; and imports and the change in private inventories may have distorted the real growth in the economy. Although Fed officials are playing it close to the vest, most investors expect the next move in fiscal policy - whether in 2024 or 2025 - will be a reduction in the fed funds rate. As of the Friday before Memorial Day weekend, the S&P 500 was up 11.8% year-to-date on a total return basis. At a close of 5,305 as of 5/24/24, the S&P 500 was 0.3% below its all-time closing high of 5,321. The Nasdaq, which has slightly lagged the S&P 500 for almost all of 2024, has finally moved ahead and was up 13.1% as of 5/24/24; the Nasdaq hit an all-time closing high of 16,921. The DJIA is up a lesser 4.4% on a total return basis for 2024, hurt by big bank stocks, technology also-rans such as Intel, and outliers such as Boeing. The Dow at 39,070 as of 5/24/24 is about 2.5% below its all-time high above 40,000. At the sector level, the advance in 2024 is broad-based and thus much healthier than the tightly concentrated market in 2023. Again as of 5/24/24, Communication Services was up 21.6% year to date, making it the only 20%-plus gainer. A year earlier, three sectors were up over 20% and well out in front of the broad market while the other eight sectors were languishing. In second place is Information Technology, up 18%; Technology has used the May bounce-back to usurp the silver medal from now third-place Utilities. This traditional defensive sector is rising even though the Fed's timeline for its first rate cut keeps getting pushed back. Investors are also betting that Utilities will benefit from growth in power-hungry data centers as demand for generative AI kicks into a higher gear. After the top three, another four sectors - Financial, Energy, Industrials, and Consumer Staples - are up in the 9%-11% range year to date, approximately tracking the broad market. Materials and Healthcare are both up 6%-7%. Consumer Discretionary, one of 2023's winners, is barely above breakeven in 2024. Although this sector represents less than 10% of the market, its lagging performance should not be ignored. If most consumers are unable to make big-ticket and discretionary purchases, all aspects of the industrial and commercial economy will be impacted to some degree. Real Estate is the only negative sector in 2024. This sector is punching above its weight, and not in a good way. The stagnation in the housing market keeps boomers locked in too-big homes, distorts prices for the homes that are available, and keep millennials and other generations locked in the renter cycle. Underperformance in these two bottom sectors signals ongoing pressures in the economy that are difficult to resolve in a high interest rate environment. The Market Does Not Like Those Hazy, Lazy Days of Summer The U.S. does not exist in a vacuum, and solid trends in global stocks are a positive for U.S. investors. Much of that strength is concentrated in mature economy markets such as the Eurozone, which includes large trading partners. China too has turned around, in what may be a sign that China's economic struggles are resolving; or it may be another head-fake. For U.S. investors, the warm weather has historically brought a meaningful slow-down in the stock market. In any year, stock-market gains tend to be concentrated in the early month and the later months. That often leaves the June-September period dead in the water, or with feeble gains at best. May itself has been a good stock month, averaging capital appreciation of 0.88% on the S&P 500 for all years from 1980 through 2023. There are of course outliers either way, including a 6.6% decline in 2019 and a 4.5% gain the next year in 2020. While May has been generally good, June has averaged just a 0.25% gain over that 1980-2023 period. July has been among the strongest months with a 1.36% average gain, but it is followed by August (down 0.02%) and September (down 1.07%) over the 1980-2023 period. For all years in the survey period, June through September has averaged total capital appreciation of just 1.1% on the S&P 500. Performance since the millennial turn in 2000 is actually worse with a four-month gain of just 0.1%. Just since 2009 as the economy came out of the great recession, summer has averaged better-than-average capital appreciation of 2.7%. Conclusion Just a few days after Memorial Day, it is a bit early to say goodbye to 'Wall Street summer,' which stretches between the two holidays with no regard for the calendar summer. But when we do say goodbye to summer, the Fed either will have or will not have made its first rate cut. And regardless of the Fed, the election will be heating to fever pitch. Stock markets that do well in the January-May period tend to end with solid full-year wins on the S&P 500. But investors are unlikely to feel comfortable with that statistical outcome until inflation breaks its stalemate and moves toward the Fed's 2% target, and the Fed responds with its first rate cut in the cycle.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

Stocks were mixed on Thursday after core PCE came in as expected. Prices rose 0.3% in January, bringing annual inflation to 2.4% -- down from 2.6% last month. Core PCE rose 0.4%, which brings the annual rate to 2.8%, down from 2.9% last month. Prices for services increased 0.6%, while goods prices decreased 0.2% and energy prices fell 1.4% from December. Initial jobless claims rose by 13,000 to 215,000 for the week ended February 24. The S&P 500 was up 0.1%, the Dow fell 0.2% and the Nasdaq gained 0.3%. Crude oil traded near $79 per barrel and gold was up $11 to $2053 per ounce.

Some investors believe that so-called 'seasonals' are enough to carry stocks higher through the end of 2023, and this year we are inclined to include corporate insiders in that group. Insider-sentiment data from Vickers Stock Research was very supportive of share-price gains during the push higher over the past month. But insiders have now pulled back to what we would call a 'let it ride' posture -- one in which selling is not extreme but buying is not evident either.

Summertime Blues

In this edition, addressing investors' fears over Chart; obesity launches reinforce GLP-1 growth; reassessing Berkshire Hathaway; NiSource, LiveRamp Holdings, and Zoom Video Communications.

Stocks fell again on Wednesday morning on mounting concerns about the debt ceiling standoff and a potential U.S. default. Investors also awaited the afternoon release of the latest Fed meeting minutes, which should provide clues about the central bank's next interest rate decision. The Dow fell 0.8%, the S&P 0.8%, and the Nasdaq 0.9%. Crude oil traded near $74 per barrel, while gold fell $4 to $1970 per ounce.

Monday Tee Up: Jobs Friday and Powell Testimony

Stocks fell on Thursday morning, a day after Wednesday's strong Fed-driven rally. Inflation data was cooler than expected. The core PCE price index, excluding food and energy, rose 0.2% from the prior month in October, down from a 0.5% gain in September and below the Bloomberg consensus forecast. The year-over-year increase in the core PCE also slowed to 5.0% from 5.2% a month earlier. The Dow fell 0.9%, the S&P fell 0.2%, and the Nasdaq was flat. Crude oil fell $2 to $82.50 per barrel, while gold jumped more than 3% to $1813 per ounce.

Fed Chair Jerome Powell will deliver his much anticipated speech in Jackson Hole on Friday morning. Investors will be scrutinizing Mr. Powell's comments for clues about the size of the September interest rate hike, and the pace of additional hikes later this year and in 2023. Ahead of the Fed conference, Kansas City Fed President Esther George said that it was 'too soon' to predict the size of the September hike, and that the decision would depend on upcoming economic data. On Thursday, the Commerce Department reported a smaller-than-expected decline in 2Q GDP. First-time claims for state unemployment benefits were down slightly from the prior week and below the consensus forecast. The Dow rose 0.98%, the S&P 1.41%, and the Nasdaq 1.67%. Crude oil fell 2% to $93 per barrel, while gold rose $10 to $1771 per ounce.

Stocks rallied on Thursday, led by the Consumer Discretionary, Communication Services, and Technology sectors. Tesla and Nvidia shares both rose strongly, and Microsoft finished higher despite the cut in its current-quarter guidance. On the employment front, first-time claims for state unemployment benefits fell to 200,000 for the week ended May 28, down from 211,000 a week earlier and below the consensus estimate. ADP also reported that U.S. companies added 128,000 payroll jobs in May, down from 202,000 in April and well below the consensus forecast of 300,000. The data came ahead of the government's May employment report on Friday morning. The Reuters consensus calls for 325,000 new payroll jobs after a gain of 428,000 in April. The Dow rose 1.33%, the S&P 1.84%, and the Nasdaq 2.69%. Crude oil traded near $118 per barrel, while gold rose $25 to $1874 per ounce.

Market breadth remains on the weak side, a bearish sign for stocks. However, some breadth indicators have reached oversold territory and levels that historically have preceded intermediate-term bottoms. There is one big assumption here: that the stock market is still in a bull market and the current decline won't turn into a bear market. As we have been saying, we think this is a correction in a bull market, and not something far worse.

After reaching euphoric levels in November, sentiment quickly cooled in the face of price volatility, and has been cautious for most of December. That is not surprising, as the major indices moved down rapidly, saw a failed rally, and then fell again (with some indices testing their first lows).

Raising Earnings Estimates for 2021 and 2022

Due to a difficult September, in which the S&P 500 fell 4.7%, 3Q21 was barely positive for stocks, with the major benchmark index increasing only 0.6%. The average stock in the Argus Universe of Coverage fell 1.7% during the quarter, and the median stock dropped 1.4%. The average BUY-rated stock slipped 0.9%, while the average HOLD-rated stock declined 3.7%. Will investors continue to favor value in 2021? Will small-caps reverse their recent weak trend? Given low interest rates, we expect growth stocks to resume their outperformance over time, and think this may be the one-in-five years that value leads. Investors seeking value are encouraged to focus on dividends and look for yields in the 3%-4% range. As for small-caps, the promise of the vaccine is encouraging for these companies, which typically don't have the gilt-edged balance sheets of large-caps and are thus more dependent on a strong U.S. economy. Small-cap valuations remain depressed, and this group looks to offer value into 2022.

A couple of the major indices are again hitting or approaching some key Fibonacci extension targets, so this is no time to put a portfolio on auto-pilot (even if that's how it feels). The targets are based on the depth of the 'V' bottom back in early 2020. Once an index or individual stock breaks out to all-time highs, there is no chart resistance or supply overhead as every buyer of the asset has a profit. Therefore, potential targets must come from other technical tools like trendlines, the top of a channel, and Fibonacci extensions based on the size of the latest reversal formation.

Jobs Are Coming Back, But Is It Enough?

This edition features our oil-demand forecast; Chinese banks; new coverage of a Chinese homecare firm; and notes from BlackBerry, Zoom, and DocuSign.

Blue Chips finished the 2/26/2021 week with more selling, although the hardest-hit part of the market (Nasdaq growth stocks) staged a feeble rebound on Friday. The market is not in freefall, but the S&P 500 is down 3.2% from its all-time high of 3,935 reached on 2/12/21. Pullbacks and corrections are commonplace, but this one feels different because of the trend in long rates. Still, investors always say 'this one feels different' until it's forgotten in the next pullback.

This edition features an overvalued tech sector; the capitol riot; fast fashion; and notes from Intel, Veolia, and Aphria.

On paper, most recent investment trends remained intact for the full year 2020. Large-caps outperformed small-caps; growth topped value; and domestic stocks returned more than international stocks. Will it be a value market in 2021? Will small-caps continue their recent strong run? Given low interest rates, we favor growth stocks and think that investors recently were simply taking some extraordinary profits from their winners in an extraordinary year. Investors seeking value are encouraged to look for dividend yields in the 3%-4% range. As for small-caps, the promise of a COVID-19 vaccine is encouraging for these companies, which typically don't have the strong balance sheets of large-caps and are thus more dependent on a strong U.S. economy. Small-cap valuations remain depressed despite the recent run, and this group continues to look well-positioned in 2021.

Stocks pared early losses on Wednesday morning as investors weighed new employment data and prospects for a $908 billion emergency relief package proposed by a bipartisan group in Congress. Payroll provider ADP said that U.S. private employers added 307,000 jobs in November, down from 404,000 in October and well below the Reuters consensus forecast of 410,000. Salesforce shares fell 7% after the company announced that it would purchase business communications company Slack in a $28 billion deal. Salesforce also posted better-than-expected 3Q results, but offered disappointing earnings guidance for the fourth quarter. The Dow and the S&P were flat, and the Nasdaq fell 0.2%. Crude oil traded near $45 per barrel, while gold rose $11 to $1830 per ounce.

Stocks were mixed on Wednesday morning amid weaker-than-expected August employment data. Payroll provider ADP said that U.S. private employers added 428,000 jobs last month, up from a revised 212,000 in July but well below the Reuters consensus forecast of 950,000. The Dow rose 0.7%, the S&P rose 0.6%, and the Nasdaq fell 0.2%. Crude oil traded near $42 per barrel, while gold fell $32 to $1947 per ounce.

Stocks were mixed on Wednesday morning amid weaker-than-expected August employment data. Payroll provider ADP said that U.S. private employers added 428,000 jobs last month, up from a revised 212,000 in July but well below the Reuters consensus forecast of 950,000. The Dow rose 0.7%, the S&P rose 0.6%, and the Nasdaq fell 0.2%. Crude oil traded near $42 per barrel, while gold fell $32 to $1947 per ounce.

Stocks climbed higher on Friday, capping off an already strong week. Blue chips led the way, while riskier stocks posted more modest gains. Despite widespread protests over the death of George Floyd, states continues to move forward with reopening plans, giving investors reason to be optimistic. The Dow Jones Industrial Average gained nearly 830 points, or 3.2%, on Friday, while the Nasdaq Composite advanced 2.1% and the S&P 500 added 2.6%. For the full week, the Dow added more than 1700 points and rose 6.8%. The S&P 500 rose 4.9%, and the Nasdaq was up 3.4%. Year-to-date losses are now 5.0% for the Dow and 1.1% for the S&P 500, while the Nasdaq is up 9.4%. Over the past 52 weeks all three indexes are positive. The Dow is up 4.3%, the S&P 500 is up 11.2%, and the Nasdaq is up 9.4%.

Stocks climbed higher on Friday, capping off an already strong week. Blue chips led the way, while riskier stocks posted more modest gains. Despite widespread protests over the death of George Floyd, states continues to move forward with reopening plans, giving investors reason to be optimistic. The Dow Jones Industrial Average gained nearly 830 points, or 3.2%, on Friday, while the Nasdaq Composite advanced 2.1% and the S&P 500 added 2.6%. For the full week, the Dow added more than 1700 points and rose 6.8%. The S&P 500 rose 4.9%, and the Nasdaq was up 3.4%. Year-to-date losses are now 5.0% for the Dow and 1.1% for the S&P 500, while the Nasdaq is up 9.4%. Over the past 52 weeks all three indexes are positive. The Dow is up 4.3%, the S&P 500 is up 11.2%, and the Nasdaq is up 9.4%.

April was almost -- but not quite -- in the books when the hopeful sentiment that lifted stocks began to fade. The prior trading week ended with two consecutive down days. Now, May lies ahead and many-times burned investors are wondering, again, if they should sell in May and go away.

April was almost -- but not quite -- in the books when the hopeful sentiment that lifted stocks began to fade. The prior trading week ended with two consecutive down days. Now, May lies ahead and many-times burned investors are wondering, again, if they should sell in May and go away.

This edition features undervalued banks; opportunities in U.S. autos; pharma and biotech during the COVID-19 crisis; and notes from Zoom, Safran, and 3M.

The April 6 trading week got off to a great start, with the indices all-higher by over 7% on Monday, and the MidCap 400 and Russell 2000 both up about 8%. The SPX, NASDAQ, QQQ, NYSE, and Dow Jones all ran back to or exceeded their recent recovery highs, while the MDY and IWM are getting close to their recent highs.

The April 6 trading week got off to a great start, with the indices all-higher by over 7% on Monday, and the MidCap 400 and Russell 2000 both up about 8%. The SPX, NASDAQ, QQQ, NYSE, and Dow Jones all ran back to or exceeded their recent recovery highs, while the MDY and IWM are getting close to their recent highs.

The S&P 500 plunged 12% on Monday, it's worst one-day decline since the crash of October 19, 1987. From its all-time high on February 19, the index has plunged 29.5% in just 18 days, also the worst decline since 1987. The index closed at 2,386 and is rapidly approaching key chart support near 2,350 from the lows in December 2018. Interestingly, that area also represents a key Fibonacci retracement of 38.2% of the entire bull market since 2009.

The S&P 500 plunged 12% on Monday, it's worst one-day decline since the crash of October 19, 1987. From its all-time high on February 19, the index has plunged 29.5% in just 18 days, also the worst decline since 1987. The index closed at 2,386 and is rapidly approaching key chart support near 2,350 from the lows in December 2018. Interestingly, that area also represents a key Fibonacci retracement of 38.2% of the entire bull market since 2009.

Stocks ended broadly lower on Friday, though up from the worst levels of the day, on lingering fears of the economic impact of the coronavirus as the number of cases globally exceeded 100,000. The Dow Jones Industrial Average fell 1.0%, the Nasdaq Composite was down 1.9% and the S&P 500 was off by 1.7%. Sharp daily swings remained the theme for the week, but 4% up moves on Monday and Wednesday allowed stocks to finish with gains for the week, measuring 1.8% for the Dow, 0.6% for the S&P 500 and 0.1% for the Nasdaq. Year-to-date losses improved to 9.4% for the Dow, 4.4% for the Nasdaq and 8.0% for the S&P 500.

Stocks ended broadly lower on Friday, though up from the worst levels of the day, on lingering fears of the economic impact of the coronavirus as the number of cases globally exceeded 100,000. The Dow Jones Industrial Average fell 1.0%, the Nasdaq Composite was down 1.9% and the S&P 500 was off by 1.7%. Sharp daily swings remained the theme for the week, but 4% up moves on Monday and Wednesday allowed stocks to finish with gains for the week, measuring 1.8% for the Dow, 0.6% for the S&P 500 and 0.1% for the Nasdaq. Year-to-date losses improved to 9.4% for the Dow, 4.4% for the Nasdaq and 8.0% for the S&P 500.