Weekly Tee Up: Walmart and Nvidia

Dividend income is often overlooked amid gyrations in the stock market. But dividends are an important element of return. Dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that's just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks. High-yield stocks typically have dividends that pay out in the 5%-8% range. Though the income appears attractive, the share prices of high-yield stocks may be at risk. Dividend-growth stocks typically have lower yields, often in the 1.0%-2.5% range. But the lower-yielding dividends are not likely to be a huge component of cash flow, leaving management teams with other value-additive options for deploying cash. Further, while the yields are not as high, management teams may be more likely to boost the payouts over time, as earnings grow.

First Look at 3Q23 Earnings: The Beat Goes On

The first-quarter earnings season has passed the halfway mark with 292 (or 58%) of S&P 500 companies having reported results through August 1. An impressive 81% of those companies exceeded earnings expectations, while the blended (actual and still to report) earnings decline is now projected at 5.9%, according to Refinitv. The Consumer Discretionary sector still leads with 36% earnings growth, while Energy is now by far the weakest sector, with a 48% profit decline. Our analysts are always on the lookout for companies that boost their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to market-beating returns in the quarters ahead. Here is an initial list of BUY-rated companies in Argus Coverage for which management has raised guidance or increased its outlook during the 2Q23 EPS reporting season.

We had some reversion to the mean last week, although it was just a blip on the broader radar. The Nasdaq 100 gave back 0.9% and the Nasdaq lost 0.6%, while the Russell 2000 gained 1.5%, the S&P 500 Equal Weight tacked on 1.4%, and the S&P MidCap 400 added 1.2%. The NYSE Fang Plus Index (10 stocks with equal weighting, including AAPL, MSFT, NVDA, GOOGL, TSLA) fell 3.3%. But don't fret, the index is still up 74% in 2023.

This was one of our 10 Investment Themes for 2023 and remains relevant, as the S&P 500 is up 13% year-to-date. The long-term trend in the U.S. stock market has been higher; since 1980, stocks have turned in a positive performance almost 80% of the time. The average annual gain has been 13%. That was not so in 2022. Yes, the S&P 500 set an all-time record. But it peaked on January 3 and the rest of the year was downhill. The stock market entered a bear market in June 2022. Bond returns weren't much better, as spiking inflation pushed long-term interest rates higher and the Fed raised short-term rates to try to bring inflation down. The turmoil posed a challenge for Wall Street firms, as investment returns were dismal, the IPO market dried up, and M&A activity disappeared. By year-end, Wall Street firms such as Goldman Sachs and Morgan Stanley were announcing layoffs. We are more optimistic for the financial markets in 2023. Equity valuations are lower in the wake of the selloff in 2022. There is pent-up demand for IPOs and M&A once the environment improves. Finally, consensus expectations call for weak earnings and investment returns in 2023, setting markets up for a positive surprise. As the outlook improves, we think that investor demand will pick up for investment banks, exchange operators, and money-management firms. We recently raised our sector rating on Financial Services to Over-Weight. Stocks in our coverage universe that we believe are positioned to benefit include the following.

The volume of weekly insider transactions reported by Vickers Stock Research remains very low, as earnings season is in full swing. For the past few weeks, we've noted that, among the low volume, the vast majority of transactions have been the result of preplanned sales by corporate executives, directors and beneficial owners. That remains the case this week, as preplanned sales again make up the largest number of insider transactions.

Stocks finished sharply lower on Thursday after giving up early gains. Investors weighed earnings from a range of major companies, including Disney, PepsiCo, and AbbVie. On the employment front, the Labor Department said that first-time claims for state unemployment benefits rose by 13,000 to 196,000 for the week ended February 4, above the Reuters consensus forecast of 190,000. Continuing claims rose by 38,000 to 1.688 million. The Dow fell 0.73%, the S&P 0.88%, and the Nasdaq 1.02%. Crude oil traded near $78 per barrel, while gold fell $18 to $1860 per ounce.

The long-term trend in the U.S. stock market has been higher. Since 1980, stocks have turned in positive performances almost 80% of the time. The average annual gain has been 13%. That was not the case in 2022. Sure, the S&P 500 set an all-time record. But it peaked on January 3, and the rest of the year was downhill. The stock market technically entered a bear market in June. Bond returns weren't much better, as spiking inflation pushed long-term interest rates higher and the Federal Reserve raised short-term rates to try to bring inflation under control. The turmoil in the marketplace posed a challenge for Wall Street firms, as investment returns were dismal, the IPO market dried up, and M&A activity disappeared. By year-end, Wall Street firms such as Goldman Sachs and Morgan Stanley were announcing layoffs. Looking ahead, we are more optimistic for stocks in 2023. For one thing, equity valuations are lower in the wake of the sharp sell-off in 2022. For another, there is pent-up demand for IPOs and M&A, once the environment improves. Finally, consensus expectations call for weak 2023 earnings and investment returns, setting the markets up for a positive surprise. As the outlook for financial firms improves, we think investor demand will pick-up for investment banks, exchanges, and money management firms. Stocks in our Universe of Coverage that are in position to benefit include the following.

October, as it has been many times in the past, was a wild month -- and at least a short-term bear killer. The month started out great and then the major indices fell off a small cliff and declined to new bear-market lows. But stocks had an amazing bullish reversal on October 13 and have been grinding nicely higher ever since. While it's a start, we are a long way from putting the bear fully into hibernation, despite the calendar's turn toward colder weather.

Earnings season continues today, with reports from Exxon, Procter & Gamble, and Abbvie. On Thursday, Apple and Amazon reported better-than-expected results after the bell. The major indices rose strongly despite weaker-than-expected GDP data, as the Commerce Department reported that the U.S. economy contracted at a 0.9% pace in 2Q. On the employment front, first-time claims for state unemployment benefits fell to 256,000 for the week ended July 23, down from 261,000 a week earlier. The Dow rose 1.03%, the S&P 1.21%, and the Nasdaq 1.08%. Crude oil rose slightly to $97 per barrel, while gold rose 2% to $1773 per ounce.

Literally everything seems to be going against the stock market. Rising yields across the curve, a strong dollar (which no one seems to be talking about), surging crude oil prices along with gasoline and heating oil, and a Fed that must start taking liquidity out of the system. Oh, and let's not forget about the war, continued supply issues, and stubborn inflation. Did we miss anything? Ah, yes. A breakdown in mega-growth stocks, an absolute collapse in hyper-growth stocks, a massive drawdown in cryptos, and broad economic worries.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Our rating on the Financial Services sector is Over-Weight. Based on positive vaccine developments and actions from the administration in Washington, interest rates have started to move higher at the long end of the yield curve. We expect banks to benefit from wider net interest margins and lower loan-loss provisions as the economy normalizes. We also expect insurance companies to generate higher income in their investment portfolios. The sector accounts for 10.7% of the S&P 500, down from 16.3% following the exclusion of Real Estate stocks. Over the past five years, the weighting has ranged from 9% to 17%. We think the sector should account for 11%-12% of diversified portfolios. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All of the following stocks currently are rated BUY at Argus.

The stock market returned to its bearish ways last week, as the January CPI posted its highest annual increase in 40 years and the 10-year Treasury yield pushed up almost to 2%. On Friday, the Dow Jones Industrial Average dropped 504 points, or 1.43%. The S&P 500 fell 1.90%, and the Nasdaq Composite plunged 2.78%. For the week, the DJIA was down 351 points, or 1.00%, the S&P 500 was down 1.82%, and the Nasdaq Composite was off by 2.18%. Year-to-date, the Dow is down 4.40%; the S&P 500 is off 7.29%; and the Nasdaq Composite is back in correction territory, down 11.85%.

Over the weekend, the House of Representatives approved the largest public works bill since the 1950s. The bipartisan trillion-dollar bill, which was passed by the Senate in August, now goes to President Biden's desk for signing. The plan focuses on improving the country's infrastructure, from roads and bridges to water systems and electricity grids. It also targets the auto industry, with a focus on electric vehicles and charging stations. In the power sector, Biden's goal is to achieve a carbon-free power industry by 2035. To improve energy efficiency in buildings, he is looking to retrofit four million buildings in the four years. Elsewhere, business Services companies also stand to benefit; bond issuance should pick up given that the infrastructure spending plan will be financed at least in part by bonds; and payroll companies could get a boost processing more paychecks as the infrastructure plan creates "millions of good paying jobs." All-in-all, some of the companies that we think may benefit include the following.

The stock market moved higher last week during the busiest days of earnings season. Tech stocks far outperformed blue chips, though a portion of the outperformance was attributable to Tesla, as its stock is included in the S&P 500 and Nasdaq Composite, but not the DJIA. During Friday's session, the Dow Jones Industrial Average increased 89 points, or 0.25%. The S&P 500 was up 0.19%, and the Nasdaq Composite was up 0.33%. For the week, the DJIA was up 143 points, or 0.40%, the S&P 500 was up 1.33%, and the Nasdaq Composite was up 2.70%. For the YTD, the DJIA is up 17.03%, the S&P 500 is up 22.61%, and the Nasdaq Composite is up 20.25%.

Second-quarter earnings announcements are nearly complete, with some 90% of S&P 500 companies having reported. The profit recovery from the depths of the pandemic low in 2Q20 was been swift, with earnings growth of 93% in 2Q21, according to Refinitiv. But earnings do not look good just on a relative basis -- the $53.93 projected to be earned by S&P 500 companies for the second quarter is the highest ever for the index. Investors can now turn their attention to the third quarter, when earnings are expected to rise a still-strong 30% year-over-year. Our analysts are always on the lookout for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to strong returns in the quarters ahead. Here are 20 BUY-rated companies in Argus coverage for which management has raised guidance or increased its outlook during the 2Q21 EPS reporting season.

Stocks were mixed on Tuesday morning amid uncertainty about the economic impact of the Delta variant. Factory order data showed slower growth but still topped the consensus forecast. The Commerce Department said that U.S. factory orders rose 1.5% in June, above the Reuters consensus of 1.0% but down from 2.3% growth in May. The Dow rose 0.2%, the S&P fell 0.1%, and the Nasdaq fell 0.6%. Crude oil traded near $70 per barrel, while gold fell $8 to $1814 per ounce.

Yields on Treasury bonds have been falling in recent months because of expectations for a slowdown in the economy later this year. Corporate bond yields have declined as well, but not as rapidly, as investors are now more optimistic about the potential for lower default rates. As a result, spreads between corporate and Treasury bond yields have narrowed in the past few quarters. The spread between AAA-rated corporate bonds and 10-year government bonds in June was 127 basis points, in line with the 35-year average of 124 bps but down 9 bps from January. The gap between the government 10-year bond yield and a BAA-rated bond (still investment grade) in June was 192 basis points, below the historical average spread of 222 bps and down more than 31 basis points from January. From a risk-management standpoint, we watch spreads closely to gauge the bond market's view of corporate financial strength, which appears to be improving given the narrowing spreads. From an investment standpoint, we think corporate bonds generally are in line with fair value. On duration, we recommend the intermediate-term.

This edition features new coverage of DoorDash and Essential Utilities; a closer look at the S&P-IHS Markit merger; Biogen's newly approved Alzheimer's treatment; Snowflake's investor day; and a moat downgrade for Enbridge.

Our rating on the Financial Services sector is Over-Weight. With market optimism rising on positive vaccine developments and the new administration in Washington, interest rates have started to move higher at the long end of the yield curve. We expect banks to benefit from wider net-interest margins and lower loan-loss provisions as the economy normalizes, and insurance companies to generate higher income in their investment portfolios. The sector now accounts for 11.4% of the S&P 500. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 12%-15% of diversified portfolios. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model portfolios. All of the following stocks are rated BUY at Argus.

The 1Q21 EPS season is mostly in the books, with retailers the last group to report over the next two weeks. The results were impressive -- but came against an easy comparison with last year's 1Q, when the world started to shut down to fight COVID-19. Through early May, Refinitiv reported that S&P 500 earnings rose 50.4% year over year -- the best quarter since 1Q2010. Some 87% of companies have come in ahead of expectations, up from the prior four-quarter average of 76%, according to Refinitiv. Where is the growth? Consumer Discretionary remains atop the list with a 170% earnings increase. Financials is second at 130%. Only Industrials is expected to remain negative -- with a 2% decline. Even the Energy sector, expected to have an earnings decrease at the start of the quarter, is now poised for 8% growth. Our analysts are always on the lookout for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst for strong returns in the quarters ahead. Here are 20 BUY-rated companies in Argus coverage at which management has raised guidance or increased its outlook during the 1Q21 EPS reporting season.

April 2021 lived up to its billing as the best stock month of the first half. During April, the S&P 500 appreciated 5.2%, better than any month so far this year; March was closest with a 4.2% gain. Through the end of the fourth month, the S&P 500 is up 11.3% year-to-date.

Yields on Treasury bond have been rising in recent months becasue of expectations for a rebound in the economy this year (driven in part by extensive deficit spending). Corporate bond yields have risen as well, but not as rapidly, as investors are now more optimistic about the potential for lower default rates. As such, spreads between corporate and Treasury bond yields have narrowed. The spread between AAA-rated corporate bonds and 10-year government bonds in March was 143 basis points (bps), above the 35-year average of 124 bps but down 20 bps from September. The gap between the government 10-year bond yield and a BAA-rated bond (still investment grade) in March was 213 basis points, below the historical average spread of 223 bps and down more than 50 basis points from September. From a risk-management standpoint, we watch these spreads closely to gauge the bond market's view of corporate financial strength, which appears to be improving given the narrowing spreads. From an investment standpoint, we think that corporate bonds generally are in line with fair value. On duration, we recommend the intermediate term.

President Joe Biden is preparing to announce an infrastructure-rebuilding plan that he estimates will create up to 10 million clean energy jobs. The following areas of the economy stand to benefit from the government spending, which could total as much as $4 trillion. The first element of the plan is improving the country's infrastructure, from roads and bridges to water systems and electricity grids.

We have highlighted (repeatedly) the current strong market breadth, even suggesting it might be too strong and in need of a reset. We've also talked about extremely overheated market sentiment, also in need of a nice reset as we see it.

We recently upgraded our rating on the Financial Services sector to Over-Weight. With market optimism rising on positive vaccine developments and the presidential transition, interest rates have started to move higher at the long end of the yield curve. We expect banks to benefit from wider net interest margins and lower loan-loss provisions as the economy normalizes, and insurance companies to generate higher income in their investment portfolios. The sector accounts for 10.4% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 9% to 17%. We think the sector should account for 11%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020, with a loss of 9.6%. It slightly outperformed in 2019, with a gain of 29.2%, and underperformed in 2018, with a loss of 14.7%. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model portfolios. All of the following stocks are rated BUY at Argus.

The 3Q20 EPS season is mostly in the record books, with retailers the last group to report. The results were not pretty, but were better than 2Q20. Through mid-November, Refinitiv reported that S&P 500 earnings declined in 3Q at a 7.4% rate -- a vast improvement from the prior quarter's 30.5% decline. Excluding the Energy sector, earnings declined at a 3.2% rate. Of the 462 companies in the S&P 500 that have reported earnings to date for 20Q3, 84% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four-quarter average of 73%. Our analysts are always looking for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to strong returns in the quarters ahead. There were not many in this most-recent period. Here are 12 BUY-rated companies in Argus Coverage for which management has raised guidance or increased its outlook during the recent EPS reporting season.

Stocks rose on Thursday, rebounding from Wednesday's selloff but also giving up some of their gains late in the session. The Commerce Department reported strong growth in 3Q GDP, which rose at a better-than-expected 33.1% annualized rate. Unemployment claims, still high by historical standards, also trended lower. First-time unemployment benefit claims fell from the prior week to 751,000, below the consensus forecast. Continuing claims totaled 7.756 million, also down from the prior week and below consensus. The Dow rose 0.52%, the S&P 1.19%, and the Nasdaq 1.64%. Crude oil fell more than 3% to $36 per barrel, while gold fell $13 to $1866 per ounce.

The 2Q20 EPS season is in the record books, and the results were not pretty. Through late August, Refinitiv reported that S&P 500 earnings declined at a 30.5% rate. The Industrial and Energy groups were the weakest performers, while the defensive Utilities and Healthcare sectors were the strongest, up in the mid-single digits. The Tech sector's earnings increased 3%. Our analysts are always on the lookout for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to strong returns in the quarters ahead. There were not many in this most-recent period. Here are 12 BUY-rated companies in Argus Coverage for which management has raised guidance or increased its outlook during the recent EPS reporting season.

The 2Q20 EPS season is in the record books, and the results were not pretty. Through late August, Refinitiv reported that S&P 500 earnings declined at a 30.5% rate. The Industrial and Energy groups were the weakest performers, while the defensive Utilities and Healthcare sectors were the strongest, up in the mid-single digits. The Tech sector's earnings increased 3%. Our analysts are always on the lookout for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to strong returns in the quarters ahead. There were not many in this most-recent period. Here are 12 BUY-rated companies in Argus Coverage for which management has raised guidance or increased its outlook during the recent EPS reporting season.

Stocks finished mixed on Thursday following a record decline in quarterly GDP and continued high unemployment claims. Investors were also rattled earlier in the session by a tweet from President Trump calling for a delay in the November election. The U.S. economy contracted at a 32.9% annualized rate in the second quarter, and first-time unemployment claims exceeded 1 million for the 19th straight week, with a slight increase to 1.434 million. Continuing claims, reported with a one-week lag, also rose to 17.01 million, above the Bloomberg consensus of 16.2 million. The Dow fell 0.85%, the S&P fell 0.38%, and the Nasdaq rose 0.43%. Crude oil fell 2% to $40.50 per barrel, while gold dropped $5 to $1972 per ounce.

Stocks finished mixed on Thursday following a record decline in quarterly GDP and continued high unemployment claims. Investors were also rattled earlier in the session by a tweet from President Trump calling for a delay in the November election. The U.S. economy contracted at a 32.9% annualized rate in the second quarter, and first-time unemployment claims exceeded 1 million for the 19th straight week, with a slight increase to 1.434 million. Continuing claims, reported with a one-week lag, also rose to 17.01 million, above the Bloomberg consensus of 16.2 million. The Dow fell 0.85%, the S&P fell 0.38%, and the Nasdaq rose 0.43%. Crude oil fell 2% to $40.50 per barrel, while gold dropped $5 to $1972 per ounce.

Stocks finished mixed on Thursday following a record decline in quarterly GDP and continued high unemployment claims. Investors were also rattled earlier in the session by a tweet from President Trump calling for a delay in the November election. The U.S. economy contracted at a 32.9% annualized rate in the second quarter, and first-time unemployment claims exceeded 1 million for the 19th straight week, with a slight increase to 1.434 million. Continuing claims, reported with a one-week lag, also rose to 17.01 million, above the Bloomberg consensus of 16.2 million. The Dow fell 0.85%, the S&P fell 0.38%, and the Nasdaq rose 0.43%. Crude oil fell 2% to $40.50 per barrel, while gold dropped $5 to $1972 per ounce.

Innovation may be hard to define but, to borrow from former U.S. Supreme Court Justice Potter Stewart, you know it when you see it. The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles, to a large degree - have moved overseas, where costs are lower. Yet the U.S. economy, prior to the pandemic, had expanded to record levels. And now the U.S. Healthcare industry is mobilizing to improve COVID-19 testing, treatments and, ultimately, a vaccine. If U.S. corporations weren't innovating, creating new products and services and moving into new markets and applications, the domestic economy would not have recently completed a 10-year expansion phase before the coronavirus hit, and capital would not be flooding into the country. A couple of statistics should help illustrate our point. Consider that U.S. GDP was approximately $1 trillion in 1930 but nearly $22 trillion in 2019. That's growth of 22-times. Meanwhile, the U.S. population has grown less than 3-times during that time span, to 320 million from 120 million. The delta between GDP growth and population growth has been driven in large part by innovation. In addition, the value of listed corporations on U.S. stock exchanges at the end of 2018 was approximately $32 trillion, representing 41% of global equity market capitalization, while U.S. GDP represented only 25% of global GDP.

Back in April and May, we took a look at the largest biotech ETF, the iShares Nasdaq Biotechnology or IBB. Biotechs were all the rage five years ago. It was like the Technology (dot.com) bubble all over again. While the mega-cap biotech names were responsible for the majority of the gain in IBB, there were huge sums of money made and lost in the smallest of issues. Many tiny biotech names, some with barely a product in Phase 1 trials and others with just a pipe dream of an idea, were flying.

Back in April and May, we took a look at the largest biotech ETF, the iShares Nasdaq Biotechnology or IBB. Biotechs were all the rage five years ago. It was like the Technology (dot.com) bubble all over again. While the mega-cap biotech names were responsible for the majority of the gain in IBB, there were huge sums of money made and lost in the smallest of issues. Many tiny biotech names, some with barely a product in Phase 1 trials and others with just a pipe dream of an idea, were flying.

Our rating on the Financial Services sector is Market-Weight. The recent rush into safe-haven Treasuries has led to an historical collapse in interest rates, further pressuring banks' net interest margins. We also believe that speculative-grade debt, particularly in the Energy sector, faces viability risks if economic activity remains suppressed for an extended period. The sector accounts for 10.6% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 10%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All stocks are rated BUY.

Our rating on the Financial Services sector is Market-Weight. The recent rush into safe-haven Treasuries has led to an historical collapse in interest rates, further pressuring banks' net interest margins. We also believe that speculative-grade debt, particularly in the Energy sector, faces viability risks if economic activity remains suppressed for an extended period. The sector accounts for 10.6% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 10%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All stocks are rated BUY.

The key stock-market debate continues. Is this a new bull market or a rally in a bear market? We have been hearing that the March bottom was the bear-market bottom and that we are in the beginning of a new bull market. But while price action and certain indicators suggest a new bull has started, other indicators are still firmly entrenched in the bear camp.