Monday Morning Edge Report - October 16, 2023

First FULL Week of Q3 Earnings Season

Author

Mark Roussin
October 16, 2023

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Market Talk ⏪

Welcome to the Monday Morning Edge Report, where we breakdown some of the top stories going on in the stock market and put it is an easy to understand report.

It has been a whirlwind few weeks not only for the stock market but my health. I was out sick all last week, which is why many of you reached out wondering where th Monday Edge Report was. Two trips to Urgent Care, but now I am finally back feeling a little better.

In terms of the stock market, things were a little light to end the week, but we did see some larger intraday swings throughout the week as investors tried to digest the ongoing unrest in the middle east as well as the latest CPI data.

Let’s try to make some sense of everything by covering 5 key topics:

  1. Big Banks officially kick off Q3 earnings season: JPMorgan, Wells Fargo, and Citigroup kicked off earnings season on Friday with results that were better than expected for the most part. Credit losses continued to climb at the banks, but no immediate underlying issues were evident. More focus will be on regional banks, and the impact higher rates and potential credit losses are having on their results. During JPM’s Q3 earnings release, CEO Jamie Dimon alluded to everything going on with the war in Ukraine, to the unrest in the Middle East, to the high amounts of debt, referring to it all as “the most dangerous time the world has seen in decades.” High debt limits increase the risks of higher interest rates and higher inflation sticking around for longer than expected, according to Mr. Dimon.

  2. Geopolitical concerns and unrest in the Middle East can sway the market: The unfortunate events that took place in Israel recently has had some impacts on the financial markets, but nothing too extreme to this point. The invasion took place on October 7th and from that time, we have seen oil prices jump 6% since the events took place. Events unfolding out of this region will certainly be something to monitor, without forgetting about Russia’s ongoing war with Ukraine. Geopolitical tensions are certainly on the rise.

  3. September Inflation data (CPI & PPI) came in stronger than expected: This past week we got some updates on the fight against inflation, and the data stated that we are not yet winning that fight. Earlier in the week the Producer Price Index came out showing it increased 0.5% in September with Core PPI rising 0.3%, both above estimates. PPI is a measurement of wholesale prices, so it is costs that are further down the line prior to reaching the end consumer. CPI on the other hand focuses on the end product, and that rose 0.4% on the month and 3.7% from a year ago, both aboves estimates. Core CPI rose 0.3% on the month and 4.1% over the past year, which were in-line with expectations. Shelter costs accounted for more than 50% of the rise in CPI on a monthly basis.

  4. Hearing from the Fed this week: This week, we will be hearing from a number of different Fed officials who are set to speak. Investors will be looking for clues as to whether Fed officials believe they will in fact hike rates yet again before the end of the year, or if holding steady at current levels is more the focus after updated economic activity came in recently. There is at least one Fed official speaking every day this week. Fed Chair Jerome Powell has a speech scheduled for Thursday, so that will likely be the most important to watch. unemployment rate. There are two remaining Fed meetings (Nov 1 and Dec 13).

  5. Retail sales and Real Estate in focus this week: Further down this newsletter you will find the economic calendar for the week ahead and two of the most important items on my watchlist are Retail Sales and Housing data. On Tuesday, we will see how retail sales performed last month, which will give insights into the strength of the US consumer. On Wednesday we get data on housing starts and building permits followed by September’s existing home sales report to see if higher mortgage rates are continuing to negatively impact sales.

In addition to all the above, we have a jam packed week of earnings, the first full week of Q3 earnings season. Right now, it is key for investors to focus on quality, as right now seems more like a stock pickers market than a diversified sector market. Have a great week of investing!

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US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

The index remained in solid FEAR territory this week, not changing much from where things stood in the prior month. This could add some volatility back into the market, but also provide for some buying opportunities. Currently, the index has a neutral reading of 29, which is slightly higher than the prior week’s reading of 28.

Earnings on Deck 💰

The first FULL week of earnings season kicks of. All PREMIUM SUBSCRIBERS will be receiving Earning Reports throughout the week for stocks we cover, so stay tuned for those.

Here are the companies reporting earnings this week:

Analyst Upgrades/Downgrades 📝

In this section we will highlight any recent notable analyst upgrades or downgrades.

  • TD Cowen initiates O’Reilly as outperform

  • JPMorgan upgrades CSX to overweight from neutral

  • UBS downgrades Morgan Stanley to neutral from buy

  • Oppenheimer downgrades Texas Instruments to perform from outperform

  • Leerink upgrades Amgen to outperform from market perform

  • Bernstein upgrades Clorox to market perform from underperform

  • Bank of America upgrades Target to buy from neutral

  • Truist upgrades Exxon Mobil to buy from hold

  • HSBC initiates American Express as buy

  • Stephens initiates Campbell’s as buy

  • Stephens initiates Hershey as buy

  • Gordon Haskett upgrades Dollar General to buy from hold

  • Oppenheimer downgrades Tractor Supply to perform from outperform

Economic Data This Week 📆

Monday

  • Empire State Index (October)

Tuesday

  • Retail sales (September) 

  • Capacity utilization (September) 

  • Industrial production (September) 

  • Manufacturing production (September) 

  • Business inventories (August) 

  • NAHB housing market index (October) 

Wednesday

  • Building permits (September) 

  • Housing starts (September) 

Thursday

  • Initial claims (Week ended Oct. 14)

  • Philadelphia Fed index (October) 

  • Existing home sales (September) 

  • Leading indicators (September) 

Friday

  • None

Other Resources 📺

If you have not done so yet, check out my growing YouTube community of ~37,000 like-minded investors where I publish weekly videos focused on building wealth through investing.

Here is the latest video I released: 3 Dividend Stocks That Pay Me EVERY Month:

Here is another video I put out last week: 5 Dividend Stocks Set To Soar:

Here is one more recent video: Fire Sale on REITs: 2 Cheap REITs To Buy & 1 To Sell:

Here are a few others of my latest videos:

If you enjoyed the newsletter, leave a LIKE and COMMENT down below. Also, if there is someone that could benefit from this newsletter, consider sharing it.

Have questions? You can email me directly at [email protected].

Happy Investing!

Mark

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