Stocks went on another wild ride yesterday, a continued sign of exposed nerves, as investors await today’s Fed policy. According to the latest numbers, consumers remain cautiously confident and home prices grew by +18.3% over the past year.
Spring isn’t quite in the air yet. Why not think of spring? It is a time of regrowth, blooming flowers… warmer temperatures. No, I am not going to post the cliché outside temperature picture from my car but suffice it to say…it’s cold outside. Yesterday morning, that chill ran through the equity markets as investors watched Monday’s late-day gains evaporate and turn into deep losses. By around 11:30 AM Wall Street Standard Time (that’s Eastern if you haven’t had your first coffee yet), the Nasdaq was down by some -3% for the day. The optimist in me said, “hey, at least it is higher than Monday’s midday lows,” but that was not the blanket that has been offering me some level of warmth through these past few, difficult weeks. You see, I spend my days AND NIGHTS, focusing on companies rather than indexes. Don’t get me wrong, I can quote you the Dow or S&P like the best of ‘em, but my real interest is with the companies that make up those indexes. I, like you, prefer to back companies that have great management, solid fundamentals, and great future prospects.
These past 24-months have provided us with a proving ground for corporate fitness. We have witnessed once-in-a-generation market stresses on all fronts, including economic, geopolitics, and social. Many of us have pondered not only our financial health but our own physical health and perhaps, even our mortality. Through this, we have been able to see how companies were able to adapt and overcome, in some cases, and in others, fail to rise to the challenge. Still others were able to enjoy passing greatness, filling in temporary voids, but failing to use the moment to create sustainable business models beyond the lockdowns and remote working days. From out of that forge, we can surely find some confidence in a group of companies which will continue to succeed into the future, come what may. Now we stand at the beginning of what appears to be a bumpy road ahead of us. Stubborn inflation is eating into our hard-earned savings and the Fed, once our friend, is poised to be our possible foe with the potential to wield its draconian methods to fight it. This is causing some upset, if not confusion for the markets, which is understandable. That confusion has manifested itself in volatility and discomforting selloffs. The Fed will raise rates, and whether by its hand or ours, inflation will ultimately recede. I am by far not the oldest amongst all of us, but I have been around for enough time to witness this cycle several times. I also know that many more of them pre-date my time in the industry. You know what I also know? The good companies always prevail. Indeed, I have seen 8 recessions, inflation, countless Fed rate hikes, a Global Financial Crisis, and with those, plenty of Black Mondays and Fridays (and even maybe a Black Tuesday). Apple went public on the heels of a recession in 1982 and has weathered 4 recessions since. I am sure I don’t have to tell you that Apple has grown by +119,702% since its IPO, but I will. Now, clearly not every company is like Apple, but there are plenty of good ones out there, and maybe even some better. These are uncomfortable times for the market, for sure, and the weather may get cooler yet before spring can take hold and thaw us out. The first official day of Spring is on March 20th. The thaw doesn’t always coincide with the actual date, but it will come…it always does, despite how cold the winter was that preceded it.
WHAT’S SHAKIN’
Texas Instruments (TXN) shares are higher by +4.59% in the pre-market after the US-based chipmaker announced that it beat EPS and Revenue estimates by +16.21% and +9.21% respectively. The company also offered an upbeat sales forecast for the current quarter. Dividend yield: 2.64%. Potential average analyst target upside: +15.4%.
Microsoft Corp (MSFT) is trading higher by +3.41% in the pre-market after the company announced that it had beaten estimates on EPS and Sales by +7.06% and +1.68%, respectively. The company announced that the growth of its Azure Cloud offering had slowed in Q4, but it expects growth to pick up later this year. Compared to the group of Systems Software sub industry competitors, MSFT has a lower-than-average forward PE of 21.59. Dividend yield: 0.86%. Potential average analyst target upside: +29.6%.
F5 Inc (FFIV) shares are trading lower by -13.03% in the pre-market after the company announced that it beat EPS and Sales but offered weaker sales guidance for the current quarter. F5 expects to see sales of $610 million to $650 million, while on average, analysts are estimating $639.9 million on average. Its Communications Equipment peers have a median forward PE of 19.29 while F5 has a forward PE of 20.19. Potential average analyst target upside: +11.0%.
Also, this morning: Corning (GLW), AT&T (T), First Citizens BancShares (FCNCA), Automatic Data Processing (ADP), and Stifel Financial (SF) beat on both EPS and Revenues. General Dynamics (GD) and Anthem (ANTM) both beat on EPS but missed on Revenues. Still up before the bell is Abbott Laboratories, Boeing, Amphenol, Progressive, and Kimberly-Clark.
YESTERDAY’S MARKETS
Stocks traded down, then up, and ultimately lower, closing above daily lows yesterday (that was a mouthful, but reflective of the quality of the ride) as Fed rate hikes loom and political tension flared at the Russia-Ukrainian standoff. The S&P500 slid by -1.22%, the Dow Jones Industrial Average lost -0.19%, the Nasdaq Composite Index dropped by -2.28%, the Russell 2000 fell by -1.45%, and the S&P500 ESG Index gave up -1.28%. Bonds slipped and 10-year Treasury Note yields fell by -1 basis point to 1.76%. Cryptos gave up -0.98% and Bitcoin fell by -0.68%.
NXT UP