3M cancels the noise with a settlement

Stocks rallied on Friday in response to the Fed Chairman’s not-too-hawkish speech at Jackson Hole. University of Michigan Sentiment was revised negatively on Friday in a rare move, muddying the waters even more.

Pick a lane! I know this has happened to you. You are a responsible driver. You wear your seatbelts, keep both hands on the wheel, obey the speed limit, YOU DON’T FIDDLE WITH YOUR PHONE WHILE DRIVING… but to quote everyone’s parents, “it’s not you that I’m worried about, it’s the other drivers!” This mantra rushes through your mind in an instant when the car in front of you swerves from lane to lane without any blinkers, and worse yet, the car is in the middle of the two lanes, and you yell “PICK A LANE ALREADY!” Your spouse says, “slow down,” and you say “I am driving 10 miles under the speed limit, but this is swerving. You give up and tune into your favorite radio station to calm down. It’s frustrating, and I KNOW you know what I am talking about .

Have you felt that way about the stock market lately? You are a responsible investor. You do your homework, you READ MY DAILY NOTE often if not always, you keep up on the news, your save as much as possible, and you maintain your long-term investment objectives. But there is this guy in front of you – Jerome Powell – and just last year he “brake checked” you and you nearly slammed into his rear bumper. Brake checking is the dangerous maneuver of slamming on your brakes when the car behind you is too close and you hope to scare that driver into slowing down (I know you have never done that). So, to avoid Mr. Powell’s car you too had to slam on your brakes and possibly even ran off the road. You sat for a minute nervously realizing how close you came to utter disaster. You shook it off and pulled back onto the freeway and tried to forget it and before you knew it you were once again behind Mr. Powell.

He is no longer brake-checking but now he is driving really slowly in the fast lane. You would like nothing more than to pass him and be on your way, however, he is blocking the left lane while the right lane has bumper to bumper traffic. You are stuck and you dare not get too close to his car in case he tries that brake-check maneuver again.

Finally, the right lane starts to thin out. You know that passing in the right lane is illegal, but if you could at least get into the right lane perhaps you would have a chance to get away from Powell. You watch your rearview mirror closely and you think you see an opportunity once the next few cars pass. The move will be tricky, and you may end up getting stuck in even a slower lane, but you are committed, and you have laser focus. The right lane clears, you snap the blinker switch upward, check your mirror, check your blind spot, check your mirror again and you prepare to move. Success is so near that you can feel a tingling sensation in the back of your neck. All at once, Powell swerves into the middle of the road blocking you from proceeding. It’s as if he is trying to prevent you from getting to your end destination.

On Friday, many investors were hoping that Powell’s speech would include his intention to eventually move into the right lane and let us pass. Alas we did not get that indication. What’s more, Powell was ambiguous on which lane he intended to be in. He just moved to the center of the road. Does this 3-month chart of the Nasdaq 100 feel like your GPS map?

Speed up, slow down, some progress gained… some progress lost. It has been a frustrating journey these past few months, and the Fed will simply not get out of our way. You may feel the urge to give up or even break your investing rules or take on a riskier investment than you should in order to break away from the traffic. But I am here to urge you to remain patient and take a step back and look at your journey with a wider perspective. We have, indeed made progress!! The Nasdaq 100 is +18.5% higher than it was a year ago and +36.5% higher than it was at the beginning of this year. Powell will eventually pull off the road and traffic will clear up. Until then be patient, be safe, be diligent… and don’t mess with your phone while driving .

WHAT’S STIRRING ABOUT IN THE PREMARKET

3M Co (MMM) shares are higher by +5.10% in the premarket after the company announced that it settled a lawsuit filed by the US Military over faulty earplugs. The settlement, though quite large, is about half the size of what analysts were predicting. Of the analysts that cover the stock, 01% rate it as a buy, 80%, rate as a HOLD, and the 20% balance rate it as a SELL. Dividend yield: 6.06%. Potential average analyst target upside: +17.9%.

Emerson Electric Co (EMR) shares are higher by +1.15% after Argus Research raised its rating to a BUY while increasing its 12-month price target by +13%. In the past 30-days 57% of analysts have changed their price targets, 12 up, 0 down, and 9 unchanged. Dividend yield: 2.13%. Potential average analyst target upside: +10.0%.

FRIDAY’S MARKETS

NEXT UP

• Dallas Fed Manufacturing Activity (August) may have improved slightly to -19.0 from -20.0.
• The week ahead will be chock-full of data including some high-profile earnings, more housing numbers, JOLTS Job Openings, Consumer Confidence, GFP, PCE Deflator, and the monthly job numbers. Download the attached earnings and economic calendars for times and details.