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Market Recap ⏪

What a wild week in the market last week. We got an updated reading on CPI (inflation) plus we saw the official kick-off of Q3 earnings season with a few major banks getting us started.

Let’s begin with inflation. On a year over year basis, inflation rose 8.2%. On a month over month basis, inflation rose 0.4% during the month of September.

The market reaction after the report saw the Dow Jones Industrial fall 500 points with treasury yields climbing higher. However, by mid-morning, those losses had all but reversed and as the rest of the day went on we saw the Dow Jones completely reverse course and was up over 800 points at one point.

To be clear, there was nothing good about this report. This was simply a continued case of bad news being good news for the market. It all but gave the Federal Reserve the green light for yet another 75 basis point hike in early November.

Those big market gains were on Thursday, but everything was practically wiped away when markets sold off on Friday. We are still stuck in a bear market, and violent swings like we saw last week are typical during a bear market. Investors would be smart to take advantage of these types of moves with options or even lowering any positions you are looking to sell.

Speaking of the Federal Reserve, we also got a glimpse into their recent meeting with the release of their meeting minutes. This is typical policy for the Committee to release meeting minutes a few weeks after their two-day meeting. These minutes related to the September 20-21, 2022 meeting. The Fed has continued to stand firm in their plan to attack inflation hard, which is exactly what they have been doing. The message has continued to be the same, which means rate hikes and higher yields could continue to weigh on stock valuations.

Remember, Warren Buffett once explained higher interest rates as such:

The Fed is not going to change its course until the inflation number starts coming down, meaning, they will not be the first to change course regardless of the performance in the stock market. In all likelihood, the Fed needs to labor market to crack.

In other news, for those of you that read my newsletter and receive Social Security, you received a much needed 8.7% boost to your benefits starting in 2023, which was the highest cost of living adjustment over the past 40 years.

The Fed and the CPI report were both huge for the market last week, but that was not all that happened. On Friday we officially started the Q3 earnings season, and next we will take a look at a few notable earnings releases

Earnings News 📰

JPMorgan Chase (JPM)

• Revenue: $33.49 Billion vs $32.1 Billion (est)

• EPS: $3.12 per share vs $2.88 per share

Morgan Stanley (MS)

• Revenue: $12.99 Billion vs $13.3 Billion (est)

• EPS: $1.47 per share vs $1.49 per share

Wells Fargo (WFC)

• Revenue: $19.51 Billion vs $18.78 Billion (est)

• EPS: $1.30 per share vs $1.09 per share

Summary:

All three of these earnings results from last week happen to be within the financial industry. JPM and WFC are both big banks and MS is an investment bank.

MS saw revenues drop for a couple of reasons:#1 Investment management revenue down due to the decline in the stock market. Investment bankers make money when asset/investment accounts increase, as they earn a fee. Also, the poor market conditions have also lead to lower transactions and IPOs, which tend to be a big revenue driver for the likes of MS.

JPM and WFC both had solid earnings releases that beat analyst estimates, which was a positive. However, both banks increased their loan reserves roughly $0.8 billion during the quarter, something that we have seen continue to rise in consecutive quarters. What does this tell you as an investor? The banks are becoming less comfortable in some of their outstanding loans, which is why they are increasing their reserves. This means they are literally planning for the possibility of not getting paid back on what they consider to be “bad loans.” Is the consumer beginning to feel the pain of rising rates?

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.

When it comes to the Fear and Greed Index, in a matter of a few weeks we went from a neutral reading to an Extreme Fear reading. Inflation hot, rates moving higher for longer, and earnings needing to come down all leading to more pain in the markets. Currently, the index has a reading of 22, which is not much change from the prior week reading of 25.

Source

Earnings on Deck 💰

Another huge week of earnings on tap.

• Monday (BMO): Bank of America

• Tuesday (BMO): Goldman Sachs

• Tuesday (BMO): Johnson & Johnson

• Tuesday (BMO): Lockheed Martin

• Tuesday (AMC): Netflix

• Wednesday (BMO): Proctor & Gamble

• Wednesday (BMO): Ally Financial

• Wednesday (BMO): Prologis

• Wednesday (AMC): Tesla

• Wednesday (AMC): IBM

• Thursday (BMO): AT&T

• Thursday (BMO): Philip Morris

• Friday (BMO): Verizon

• Friday (BMO): American Express

Source

Notable Analyst Updates 📝

• UBS downgraded shares of Ford (F) to SELL with a PT of $10

• Guggenheim downgraded shares of Bristol-Meyers Squibb (BMY) to HOLD

• Guggenheim upgraded shares of Merck (MRK) to BUY

• Barclays lowers Apple (AAPL) PT from $169 to $155

• Raymond James lowers PT on shares of PG to $155

• JPMorgan increases PT of QCOM to $190

This Week 📆

Wednesday

• Housing Starts & Building Permits

Thursday

• Jobless claims

• Existing Home Sales

Other Resources 📺

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my latest video where I discussed 5 of my Favorite Dividend Growth Stocks:

Here are a few others of my latest videos:

Earn Dividends EVERY Month

Top 3 Dividend ETFs

2 Of My Latest REIT Buys

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

Have a Great Week!

Mark