Stocks Stuck Trading Sideways

Stocks appear to be waiting for clarity on the Debt Ceiling

Author

Mark Roussin
May 15, 2023

Welcome to the +85 new subscribers who joined our Dividend Investor’s Edge community this past week. If this is your first time reading, but you have not yet subscribed, join our fast growing investing community of ~9.6K investors.

Market Talk ⏪

Here is a look at 5 topics from the week prior and/or related to the week ahead for investors to be mindful of:

  1. Debt Ceiling Deadline. The US Treasury is expected to run out of funds at the start of June, which could see the US defaulting on its debt, which would be catastrophic for the US economy. Politicians continue to meet to find a middle ground in terms of how spending is being made and areas to cut budget in hopes of reducing the future deficit.

  2. CPI slowing slightly. CPI numbers for April were released last week, which showed a 4.9% increase year over year, which is the first reading under 5% in roughly two years. Not a huge decrease, but it does show that the Fed’s rate hike plan is working. Another lower reading could put an end to this Fed rate hiking cycle, which investors would cheer. Month over month, Core CPI rose 0.4%, and what this does is excludes Food and Energy, which can be more volatile.

  3. Microsoft gets EU clearance to acquire Activision Blizzard. The EU regulators had put a halt in recent weeks to Microsoft’s plan to acquire Activision Blizzard, however, they gave clearance after Microsoft agreed to some changed regarding cloud gaming. The issue at hand for EU regulators centered around the dominance in cloud gaming that Microsoft would have with this acquisition, prior to the company making some changes to how games could be streamed over the cloud and which cloud providers.

  4. The Walt Disney Co does not appear ready to pay a dividend any time soon. During the company’s Q1 earnings call at the start of the year, CEO Bob Iger made a comment regarding his intention to ask the board to reinstate the company’s dividend, which was cut during the pandemic, by the end of the year. DIS released their Q2 earnings last week that sent shares tumbling 10% on the week. They are still looking for ways to become profitable with streaming, which has proven difficult for many, but their new ad supported version of Disney + is expected to get a price hike by the end of the year. In addition, more job cuts will soon be announced for the company, so with all that, it does not seem likely that investors will see a dividend in 2023.

  5. Unemployment low but initial jobless claims climbing. Although the latest unemployment rate data showed a low percentage, the recent data regarding initial jobless claims is telling a different story. Last week, an additional 22,000 claims were added, bringing the total to 264,000, with continuing claims rising to 1.813 million. The number of Americans filing new claims for unemployment benefits, according to Reuters, reached a 1.5 year high last week, pointing to cracks in the labor market. This could also lead to the Fed to halting future rate hikes if this persists.

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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.

When it comes to the Fear and Greed Index, similar to how the market traded this past week sideways, the Fear & Greed Index stayed relatively unchanged as well from prior week. The Index currently has a GREED reading still. Currently, the index has a reading of 60, which is slightly down from the prior week reading of 59.

Earnings on Deck 💰

This week we hear from a lot of retailers, which will give us some further insights into the strength of the consumer. Here is a look at who's reporting this week:

Dividend News 📝

Here are some notable analyst upgrade/downgrades from the previous week:

  • Bank of America adds Progressive to its US1 list

  • JPMorgan upgrades Norfolk Southern and JB Hunt to overweight

  • Credit Suisse upgrades Alcoa to outperform from neutral

  • Barclays downgrades Northrop Grumman to equal weight from overweight

This Week 📆

Monday

  • Empire State Index (May)

Tuesday

  • Retail sales (April)

  • Industrial production (April)

  • Business Inventories (March)

  • NAHB Housing Market Index (May)

  • N.Y. Fed President John Williams speaks before the University of the Virgin Islands

Wednesday

  • Building permits (April)

  • Housing starts (April)

Thursday

  • Initial jobless claims (week ended May 13)

  • Philadelphia Fed Index (May)

  • Fed Governor Philip Jefferson speaks on the economic outlook at the National Association of Insurance Commissioners (NAIC) in Washington, D.C.

  • Existing home sales (April)

Friday

  • N.Y. Fed President Williams delivers the keynote address at the Thomas Laubach Research Conference in Washington, D.C.

  • Fed Chair Jerome Powell in conversation with Ben Bernanke, former Chair of the Board of Governors of the Federal Reserve System, at the Thomas Laubach Research Conference, Washington, D.C.

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: 3 Top REITs For May 2023:

Another video I put out last week: 3 Bank Stocks To Buy During This Mini Financial Crisis:

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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