Monday Morning Edge Report - September 25, 2023

Higher interest rates are here to stay

Author

Mark Roussin
September 25, 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.

This past week was a BIG week for investors as we got some clarity from the Federal Reserve on their plans.

Let me discuss some of the top stories:

  1. The Federal Reserve kept rates unchanged in their latest meeting: The Fed, as expected, decided to keep rates unchanged during their September meeting. Although it was expected, the Fed maintained their hawkish stance and they reiterated their plans to conduct one final rate hike prior to the end of the year. This put added pressure on stocks as investors weigh the impacts that higher rates will have on stocks for the longer term.

  2. Federal Reserve updates GDP forecast: During the Federal Reserve’s September meeting. not only did Fed officials vote to keep rates unchanged, but they also updated their US GDP forecast for both this year and 2024. They expect economic growth to slow next year to about 1.5%, from 2.1% this year, and for the unemployment rate to go no higher than 4.1%. The 2.1% GDP growth is up from their June forecast of 1.0%, meaning the Fed does not foresee a recession.

  3. More weakness likely ahead for the stock market: Not only are higher rates expected to weigh on stocks, but seasonally, the final week of September is also historically a very weak period for the stock market. Volatility levels, in terms of the VIX, still remain low which can be a positive, but those spiked higher towards the end of the week.

  4. Looming Government Shutdown unless both sides agree to a new deal with only a few days left until the end of the government’s fiscal year-end. September 30 is the year-end for the government, and a new deal between both sides of Congress is required to bypass the potential shutdown. The shutdown does not have a direct impact on the stock market, but it does have an indirect connection in the fact key economic data could be delayed if the government does fall into a shutdown.

  5. IPOs and Acquisitions: It has been awhile since we have talked about IPOs or acquisitions for that matter and in the week prior we got a little of both. ARM Holdings went IPO two weeks back and Instacart and Klayvio both went public this past week, as it could be a sign of the IPO market returning to somewhat normalcy. In addition, we got news that Cisco Systems acquired Splunk for an estimated $28 billion.

Other notable newsworthy topics to watch moving ahead is the ongoing auto union strikes. Ford seems to be closing in on a potential deal but Stellantis and GM still appear to have a wide gap between themselves and the union. This will undoubtedly put a number of delays on for the manufacturers, in addition, they have started to layoff some members of their workforce as a result.

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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.

Stocks are coming off a rough week with all three major indexes falling more than 1% this past week, which has pushed the Fear & Greed Index into an emotion of Fear. Currently, the index has a neutral reading of 36, which is slightly higher than the prior week’s reading of 52.

Earnings on Deck 💰

Here are the companies reporting earnings this week:

Analyst Upgrades/Downgrades 📝

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

  • Wells Fargo upgrades L3Harris Technologies to overweight from equal weight

  • Evercore ISI upgrades CVS to outperform from in line

  • Citi initiates GE Healthcare as buy

  • TD Cowen downgrades Starbucks to market perform from outperform

  • Evercore downgrades Deere to in line from outperform

  • JPMorgan downgrades Dollar General to underweight from neutral

  • Jefferies upgrades Bausch Health to buy from hold

  • Canaccord downgrades Deere to hold from buy

  • HSBC initiates Procter & Gamble as buy

Economic Data This Week 📆

Monday

  • Chicago Fed National Activity Index (August) 

  • Dallas Fed Index (September) 

Tuesday

  • Building Permits final (August) 

  • FHFA Home Price Index (July) 

  • S&P/Case-Shiller comp.20 HPI (July) 

  • Consumer Confidence (September) 

  • New Home Sales (August) 

  • Richmond Fed Index (September) 

Wednesday

  • Durable Orders (August) 

Thursday

  • Continuing Jobless Claims (Q2) 

  • GDP (Q2) 

  • Initial Claims (9/23) 

  • Pending Home Sales Index (August) 

  • Kansas City Fed Manufacturing Index (September) 

Friday

  • BEA Domestic Auto Sales final (August) 

  • PCE Deflator (August) 

  • Personal Consumption Expenditure (August) 

  • Personal Income (August) 

  • Wholesale Inventories (August) 

  • Chicago PMI (September) 

  • Michigan Sentiment final (September) 

Other Resources 📺

If you have not done so yet, check out my growing YouTube community of ~36,000 like-minded investors where I publish weekly videos focused on building wealth through investing.

Here is the latest video I released: 2 Future Dividend Stocks I Am Buying:

Here is another video I put out last week: Realty Income Stock Has CRASHED: Time to BUY, SELL, or HOLD The REIT?

Here are a few others of my latest videos:

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

Happy Investing!

Mark

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