The most important meal of the day is right here

Stocks lagged for another session as the bulls watched from the sidelines, tired from their recent surge. Even bulls need to rest, especially newborn ones.

Stuck in the middle with you. You probably don’t even remember the band, but you are likely to remember this AM classic from the spring of 1973. Am I dating myself? Were you not even around in 1973? Ok, how about Stuck In a Loop by Martin Garrix from… LAST SUMMER. Stuck in a loop was not even a thing in 1973, at least not in pop culture. It is a computer programming reference in which one, hopefully accidentally, creates a software error in which a process continues to iterate without any possible exit, hence getting stuck, otherwise known as an infinite loop, which also happens to be the street on which Apple’s headquarters is located. Proof that nerds can be funny… in their own… nerdy way. Anyway, I use this throwback and the more modern lyrical references to refer to the equity markets of late. If you are like my friend who has been so busy with work these past few weeks that he looked at his portfolio for the first time yesterday in as many weeks only to find that he has made some respectable profits since he last checked. He called me to share the big news. He said something like “stocks have been doing well, eh?”

Without him finishing his thought, I already knew that he was obviously not present in the market last week, which was the first losing week for stocks after 5 winners. The S&P500 did, indeed, run into bull market territory a few weeks back after climbing more than +20% off its October 2022 low. After surging almost another +3% in the following days, the bulls finally lost their steam, giving up some of the gains. I can assure you that this is quite normal. Think about it. Markets start to climb, stimulated by some force or forces. In this case it was, initially, hopes that the Fed would stop its hiking and then it was an AI frenzy. Word spreads to the provinces, and retail investors who have been sitting on cash since selling out near last year’s lows in anguish, rush back into the market adding to the bullish momentum. Once all the fresh cash is in, EVERYONE, city slickers and country bumpkins alike, await the next stimulus to take the market higher. That can come in the form of more good news, a strong earnings season, or even time itself. If the markets sit idle for long enough, frustrated traders will start to jump in once again, which can in some cases, if timed properly, spur a continued rally. Not all cases, trust me. For the moment, the bulls are resting, having worked hard for the past nine months.

Right now, unfortunately, there are no really good positive drivers on the horizon. On the contrary, there are many bull market detractors. The threat of recession remains high. Moreover, the Fed has finally convinced the market that it will continue to hike rates and keep them higher for longer. In a few weeks, earnings season will begin, and it is not expected to be a particularly strong one. Companies continue to cut expenses quietly while lowering sales targets. These modifications along with Q2 results will take front and center for the markets over the next several weeks. The end result can see markets stuck in a topsy turvy range for the next several months as the next steps of Fed strategy play out. In other words, if my friend gets too busy to check his portfolio until August, he is equally likely to see it slightly lower as he is to find it higher yet. It is important to note that the bears have not yet retreated to their dens. They are still lurking in the shadows hoping to scare away the bulls. If you made your move, watch carefully, watch patiently, and be thoughtful. Your next best move may be… to do nothing.

STOCKS ON THE MOVE THIS MORNING

Kellogg Co (K) shares are higher by +2.13% after Goldman Sachs raised its rating to BUY from NEUTRAL and raised its 12-month price target to $83. The stock closed at $65.60 yesterday. In the past 4 weeks analysts, on median, have raised their Q2 EPS targets by +0.17%, while slightly trimming revenue estimates. Dividend yield: 3.59%. Potential average analyst target upside: +11.5%.

Walgreens Boots Alliance Inc (WBA) shares are lower by 7.25% in the premarket after the company announced that it missed EPS estimates by -6.07%. The company also lowered its full-year guidance citing a lower COVID-19 contribution and a more cautious forward macro-economic forecast. Dividend yield: 6.07%. Potential average analyst target upside: +22.8%.

YESTERDAY’S MARKETS

Stocks slipped yesterday as the tech locomotive did not have enough steam to carry early-session gains. The S&P500 gave up -0.45%, the Dow Jones Industrial Average slipped by –0.04%, the Nasdaq Composite Index dropped by -1.16%, and the Russell 2000 Index advanced by +0.09%. Bonds gained and 10-year Treasury Note yields fell by -1 basis point to 3.72%. Cryptos fell by -2.14% and Bitcoin declined by -0.72%.

NEXT UP

• Durable Goods Orders (May) may have slipped by -0.8% after last month’s +1.1% gain.
• FHFA House Price Index (April) is expected to have climbed by +0.5% after climbing by +0.6% in March.
• New Home Sales (May) is expected to have slipped by -1.2% following April’s +4.1% gain.
• Conference Board Consumer Confidence (June) might have improved to 103.9 from 102.3.