Confounding the Experts

Stocks rose on Friday morning as investors weighed new comments from Fed Chair Jerome Powell. Speaking at Spelman College in Atlanta, Mr. Powell warned that it would be 'premature to conclude with confidence' that the Fed had completed its rate hike cycle, or to speculate on the timing of rate cuts. Mr. Powell also reiterated that the central bank was 'prepared to tighten policy further if it becomes appropriate to do so.' Meanwhile, manufacturing data was weaker than expected, as the manufacturing purchasing managers' index showed contraction for the 13th straight month. The Institute for Supply Management said that its manufacturing PMI held steady at 46.7 in November, below the Reuters consensus forecast of 47.6. The Dow rose 0.5%, the S&P 0.4%, and the Nasdaq 0.3%. Crude oil traded near $76 per barrel, while gold rose $21 to $2079 per ounce.

Stocks rose on Thursday morning. Headline PPI rose 0.7% in August, up from 0.4% in July and higher than expected. Final demand goods prices rose 20% and was the largest contributor to the increase in August, with services rising 0.2%. In final demand goods prices, energy was the key driver, surging 10.5%. These latest readings bring the annualized headline PPI to 1.6% and core PPI to 3.0%, up from 0.8% and 2.7%, respectively. The European Central Bank moved to raise its interest rate 25 basis-points to 4% today, taking it to an all-time high. The Dow rose 0.7%, the S&P 500 was up 0.6%, and the Nasdaq rose 0.7%. Crude oil traded at $90 per barrel, while gold fell $2.50 to $1930 per ounce.

Stocks rose on Thursday morning, a day after the Federal Reserve left interest rates unchanged but pointed to additional rate hikes later this year. The European Central Bank also raised its benchmark interest rate by 25 basis points to 3.5% - a 22-year high. Meanwhile, retail sales data was stronger than expected. The Commerce Department said that U.S. retail sales rose 0.3% in May, down from 0.4% growth in April, but above the Reuters consensus forecast, which called for a decline of 0.1%. The Dow rose 0.7%, the S&P 0.5%, and the Nasdaq 0.5%. Crude oil rose 2% to nearly $70 per barrel while gold traded near $1970 per ounce.

Stocks are plunging Wednesday as Credit Suisse (CS) plummets to all-time lows, adding to concerns regarding the health of the banking industry. Credit Suisse's largest shareholder ruled out additional investment, sending shares 17% lower. The Producer Price Index contrasted Tuesday's CPI report, coming in better than expected with hefty downward revisions to January's reading. Headline PPI fell 0.1% following a 0.3% rise in January (revised from 0.7%), while the core figure remained flat following a 0.1% advance in January (revised from 0.5%). Lastly, Retail Sales fell 0.4% following a 3.2% surge in January and fell 0.1% when excluding autos. The S&P 500 is down 1.6%, the Dow is down 1.7% and the Nasdaq is down 0.9%. Crude oil fell 3.9% to $68 per barrel, while gold rose $15 to $1926 per ounce.

Stocks slumped throughout 2022, as the S&P 500 entered a bear market in June and closed 19% lower for the year. Value stocks generally outperformed during the year, as the Dow Jones Industrial Average fell 9% while the Nasdaq Composite dropped 33%. The leading sectors were value-oriented, such as Energy, Utilities, Consumer Staples, and Financial Services. The average stock in the Argus Universe of Coverage declined 13% during the year, and the median stock declined 15%. The average BUY-rated stock dropped 11%, while the average HOLD-rated stock fell 17%. Will investors continue to favor value in 2023? Will high inflation drive continued outperformance in Energy?

Stocks rose on Thursday, with the S&P 500 snapping a five-day losing streak, as investors weighed a slight increase in weekly unemployment claims and awaited the November PPI report on Friday morning. After the close, Costco reported weaker-than-expected fiscal 1Q sales and earnings, sending the shares down in after-hours trading. The Dow rose 0.55%, the S&P 0.75%, and the Nasdaq 1.13%. Crude oil traded near $72 per barrel, while gold rose $3 to $1801 per ounce.

Beyond Meat is a provider of plant-based meats, such as burgers, sausage, ground beef, and chicken. Unlike other vegetarian products, Beyond Meat seeks to replicate the look, cook, and taste of meat, is targeted to omnivores and vegetarians alike, and is sold in the meat case. The products are widely available across the U.S. and Canada and in 83 additional countries as well. International revenue represented 31% of 2021 sales. The firm’s products are available in retail stores and the food-service channel. In 2019, before the pandemic struck, sales were evenly split between these two channels, although mix stood at 70% retail/30% food service in 2021. We think the recovery from the crisis and new deals with McDonald's and Yum Brands will return food-service sales to 50% in time.

Stocks fell sharply in 3Q 2022, with the S&P 500 down more than 5.2% for the period after a 9% decline in September. Year to date, the index is down 25% and in a bear market. Growth stocks have again been the weakest performers, as sectors such as Technology, Communication Services, and Consumer Discretionary have all lagged the major market indices. The leading sectors were value-oriented, including Utilities, Energy, and Consumer Staples. The average stock in the Argus Universe of Coverage declined 5.6% during the quarter, and the median stock declined 6.9%. The average BUY-rated stock dropped 5.0%, while the average HOLD-rated stock fell 7.1%. Will investors continue to favor value in 4Q22? Will high inflation drive continued outperformance in Energy? Given interest rates that are on the rise, we are thinking 2022 may be the one-in-five years that value leads growth for the full year. Investors seeking value are encouraged to focus on dividends and look for yields in the 3%-4% range. Regarding sectors, our current Over-Weights are Energy, Healthcare, Industrials, and Materials.

Stocks were higher Friday morning as the August jobs report showed the economy added 315,000 jobs, compared to the projected 300,000. However, the gain was far less than the 526,000 jobs added in July and the unemployment rate actually rose to 3.7%. Analysts had predicted the rate to stay flat, as the labor force participation rate jumped from 62.1% to 62.4%. The Dow rose 1.1%, the S&P 1.2%, and the Nasdaq was up 1.1%. Crude oil rose 2% to $88 per barrel, while gold rose $16 to $1726 per ounce.

In this edition, lofty margin targets for GlobalFoundries, a moment of reckoning for trucking companies, cable companies face future, and Beyond Meat, WPP, and Kellogg's.

Stocks plunged on Friday morning on further signs of accelerating inflation and concerns about the Fed's response. In a widely anticipated release, the Labor Department said that consumer prices rose at an 8.6% annual rate in May, up from 8.3% growth in April and above the consensus forecast of 8.3%. The reading was the highest in more than 40 years. The core CPI, excluding food and energy, rose 6.0% from the prior year, above the consensus of 5.9% growth. The Dow fell 2.1%, the S&P 2.5%, and the Nasdaq 3.1%. Crude oil fell to $121 per barrel, while gold traded near $1851 per ounce.

Stocks rose strongly on Wednesday morning, recouping some of their recent losses. The rally was led by the Financial, Industrial, and Energy sectors. In testimony before Congress, Fed Chair Jerome Powell said that the Fed was prepared to raise interest rates by 25 basis points at its upcoming meeting despite the uncertain impact of the war in Ukraine. The Dow rose 1.7%, the S&P 1.6%, and the Nasdaq 1.0%. Crude oil continued to soar, rising to $108 per barrel, while gold fell $23 to $1921 per ounce.

This edition features Box in the cloud, hailing Uber's potential, and Welltower building on the senior housing recovery.

Stocks rose on Tuesday morning following solid earnings from Walmart and Home Depot and better-than-expected retail sales data. The Commerce Department said that U.S. retail sales rose 1.7% in October, up from 0.8% growth in September and above the Reuters consensus forecast of 1.4%. Sales were also up 16.3% from the prior year. The Dow rose 0.5%, the S&P 0.5%, and the Nasdaq 0.6%. Crude oil traded near $81 per barrel, while gold fell $9 to $1857 per ounce.

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.

Despite 'catastrophic' (not our words) breadth, crazy (our word) sentiment readings, and bearish seasonals (everyone is saying that), the Nasdaq and the Nasdaq 100 (QQQ) made all-time highs on August 23, while the S&P 500 made an intraday high. Last week's dip for the '500' and the QQQs did not even reach the 50-day average, while the Nasdaq fell below on an intraday basis on August 19. On August 23, the '500' rose 0.9%, the Nasdaq 1.6%, the QQQs 1.5%, the S&P 400 MidCap 0.9%, and the Russell 2000 1.9% (the big daily winner).

This edition features new and updated coverage of Coinbase and Bath & Body Works; Biden's executive order on electric vehicles; and notes from Beyond Meat, WPP, and Kellogg.

Stocks were mixed on Tuesday morning following new manufacturing and construction industry data. The Institute for Supply Management said that its factory activity index rose to 61.2 in May, up slightly from 60.7 in April and above the Reuters consensus forecast of 60.9. However, manufacturing continues to face pressure from labor and raw material shortages. Construction spending data was weaker than expected. The Commerce Department said that U.S. construction spending rose 0.2% in April, down from 1.0% growth in March and below the consensus forecast of 0.5% growth. The Dow rose 0.4%, the S&P rose 0.2%, and the Nasdaq fell 0.1%. Crude oil traded near $69 per barrel, while gold fell $4 to $1901 per ounce.

Stocks rose strongly on Thursday amid optimism over the administration's stimulus plan and improving employment data. The Labor Department reported that first-time claims for state unemployment benefits fell to 712,000, below the consensus forecast and the lowest reading since early November. Continuing claims of 4.144 million also fell from the prior week and came in below the consensus estimate. New coronavirus cases continued to fall in the U.S. and vaccine news was positive. Pfizer/BioNTech said that they would exceed their vaccine production target by as much as 20% this year, and reported that their shot was 94% effective in preventing asymptomatic infection. The EU also approved the Johnson & Johnson vaccine. The Dow rose 0.58%, the S&P 1.04%, and the Nasdaq 2.52%. Crude oil rose to $66 per barrel, while gold rose slightly to $1723 per ounce.

There are now more than 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history - bigger than even the Baby Boomers. Yet despite their size, and according to our research, Millennials currently account for 25% of total U.S income - some $3.1 trillion in direct annual purchasing power. Millennials are already coveted by marketers, even though their annual average income is 40% below the spending levels of the generation ahead of them (Gen X) and 30% below the spending levels of Baby Boomers, who are slowing down. But as Millennials rise into their peak earning years, their earnings are expected to grow.

Even the arctic blast cannot cool this market, as the major indices hit all-time highs once again on Monday. The S&P 500 rose 0.7%, the Nasdaq added 0.95%, the Nasdaq 100 (QQQ) gained 0.7%, the S&P 400 MidCap (MDY) popped 1.6%, and the Russell 2000 (IWM) soared 2.5%.

This edition features our quarterly China outlook; independent refiners' dividends; Bidens' oil and gas restrictions; and notes from Beyond Meat, D.R. Horton, and new coverage Huntington Ingalls.

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

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.

November was the best month on the S&P 500 since...April, when the index was up 12.7%. In this unprecedented year, you do not have to go back very far to find a blowout month.

Stocks rose modestly on Friday, finishing off a mixed week that saw the major indices close flat to higher. Riskier equities performed better than blue chips, resuming a trend from the early weeks of the recovery. On Friday, The Dow Jones Industrial Average gained 191 points, or 0.7%. The S&P 500 was up 0.3% and the Nasdaq Composite was up 0.4%. For the full week, the Dow was flat, the S&P 500 was up 0.7%, and the Nasdaq gained 2.7%. For the year-to-date, the DJIA is down 2.1%, while the S&P is up 5.1%, and the Nasdaq is up 26.0%. Over the past 52 weeks, the Dow is up 9.0%, the S&P 500 is up 19.3%, and the Nasdaq is up 45.9%.

Stocks rose modestly on Friday, finishing off a mixed week that saw the major indices close flat to higher. Riskier equities performed better than blue chips, resuming a trend from the early weeks of the recovery. On Friday, The Dow Jones Industrial Average gained 191 points, or 0.7%. The S&P 500 was up 0.3% and the Nasdaq Composite was up 0.4%. For the full week, the Dow was flat, the S&P 500 was up 0.7%, and the Nasdaq gained 2.7%. For the year-to-date, the DJIA is down 2.1%, while the S&P is up 5.1%, and the Nasdaq is up 26.0%. Over the past 52 weeks, the Dow is up 9.0%, the S&P 500 is up 19.3%, and the Nasdaq is up 45.9%.

We have published our latest version of the Argus Millennial Generation portfolio. This new generation of consumers - the Millennials - has recently become the largest demographic cohort in the country, and this group, with new lifestyle preferences and different career goals, is demanding a new menu of sustainable products and services. The intersection of important Millennial trends - sustainability, healthier living, an entrepreneurial spirit - has resulted in the emergence and growth of numerous companies well suited to the new generation. Many of these companies are expected to be future industry leaders and are included in the dynamic Argus Universe of Coverage. A diversified portfolio, of course, is more than just a list of companies linked to themes. To build the Argus Millennial Generation Portfolio, we applied financial concepts such as industry diversification, income generation, risk reduction and growth at a reasonable price.

A new generation of consumers - the Millennials - has become the largest demographic cohort in the country. This group, with new lifestyle preferences and different career goals, is demanding a new menu of sustainable products and services. There are now more than 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history - bigger than even the Baby Boomers. Yet despite their size, and according to our research, Millennials currently account for 24% of total U.S income -- some $2.9 trillion in direct annual purchasing power, mostly representing older Millennials established in their work and families. Of course, Millennials are already coveted by marketers, even though their annual average income is 40% below the spending levels of the generation ahead of them (Gen X) and 30% below the spending levels of Baby Boomers, who are slowing down. That's because as Millennials rise into their peak earning years, their earnings are expected to grow. Disposable income will further rise as 30-something Millennials pay off their "mountain" of student debt. We have added the following stocks to our Millennial portfolio based on our latest review of fundamentals and consultation with our team of analysts.

A new generation of consumers - the Millennials - has become the largest demographic cohort in the country. This group, with new lifestyle preferences and different career goals, is demanding a new menu of sustainable products and services. There are now more than 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history - bigger than even the Baby Boomers. Yet despite their size, and according to our research, Millennials currently account for 24% of total U.S income -- some $2.9 trillion in direct annual purchasing power, mostly representing older Millennials established in their work and families. Of course, Millennials are already coveted by marketers, even though their annual average income is 40% below the spending levels of the generation ahead of them (Gen X) and 30% below the spending levels of Baby Boomers, who are slowing down. That's because as Millennials rise into their peak earning years, their earnings are expected to grow. Disposable income will further rise as 30-something Millennials pay off their "mountain" of student debt. We have added the following stocks to our Millennial portfolio based on our latest review of fundamentals and consultation with our team of analysts.

The Argus Research Fundamental Universe of Coverage includes approximately 500 leading U.S. and international companies. We cover the waterfront -- from Technology to Utilities, from Energy to Healthcare. Generally, we follow the Top 200 most widely-held stocks, which we source from our sister company Vickers Stock Research (which collects institutional ownership data from the U.S Securities and Exchange Commission). From there, we look to identify the next 200-300 leading U.S. and International companies to add to our list. Our Universe of Coverage is growing: three years ago, we were closer to 400. In another couple of years, we look to be closer to 600. We are adding stocks to coverage continually and often get great ideas from our clients. Here are five of our most-recent additions; all are rated BUY.

The Argus Research Fundamental Universe of Coverage includes approximately 500 leading U.S. and international companies. We cover the waterfront -- from Technology to Utilities, from Energy to Healthcare. Generally, we follow the Top 200 most widely-held stocks, which we source from our sister company Vickers Stock Research (which collects institutional ownership data from the U.S Securities and Exchange Commission). From there, we look to identify the next 200-300 leading U.S. and International companies to add to our list. Our Universe of Coverage is growing: three years ago, we were closer to 400. In another couple of years, we look to be closer to 600. We are adding stocks to coverage continually and often get great ideas from our clients. Here are five of our most-recent additions; all are rated BUY.

This edition features trouble in the meat aisle; new coverage of a health insurer; Deutsche Boerse's moat upgrade; and notes from Curaleaf, Canadian Natural Resources, and Johnson & Johnson.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, many smaller companies often are more focused on domestic operations and may not be exposed to the global economic uncertainty caused by the coronavirus. For another, prior to COVID-19, the long-term record favored small-caps over large-caps. From 2003-2019, the Russell 2000 Index had climbed 282%, compared to an advance of 233% for the Russell 1000 Index. In 2020, a relatively weak performance by the Russell 2000 Index has brought the measures more in line for the year-to-date. SP despite risks associated with smaller-cap stocks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 15%-20% of the U.S. stock market's capitalization is comprised of small- and mid-cap stocks.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, many smaller companies often are more focused on domestic operations and may not be exposed to the global economic uncertainty caused by the coronavirus. For another, prior to COVID-19, the long-term record favored small-caps over large-caps. From 2003-2019, the Russell 2000 Index had climbed 282%, compared to an advance of 233% for the Russell 1000 Index. In 2020, a relatively weak performance by the Russell 2000 Index has brought the measures more in line for the year-to-date. SP despite risks associated with smaller-cap stocks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 15%-20% of the U.S. stock market's capitalization is comprised of small- and mid-cap stocks.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, most smaller companies often are more focused on domestic operations and may not be exposed to the global economic uncertainty caused by the coronavirus. For another, prior to COVID-19, the long-term record had favored small-caps over large-caps. From 2003-2019, the Russell 2000 Index had climbed 282%, compared to an advance of 233% for the Russell 1000 Index. In 2020, a relatively weak performance by the Russell 2000 Index has brought the measures more in line for the year-to-date. This week's list includes stocks with market caps below $12 billion; that are on the Argus BUY list; and are included in our Mid-Cap model portfolio.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, most smaller companies often are more focused on domestic operations and may not be exposed to the global economic uncertainty caused by the coronavirus. For another, prior to COVID-19, the long-term record had favored small-caps over large-caps. From 2003-2019, the Russell 2000 Index had climbed 282%, compared to an advance of 233% for the Russell 1000 Index. In 2020, a relatively weak performance by the Russell 2000 Index has brought the measures more in line for the year-to-date. This week's list includes stocks with market caps below $12 billion; that are on the Argus BUY list; and are included in our Mid-Cap model portfolio.