A spoonful of sugar from the Fed made the medicine go down, as the market indexes posted their biggest weekly percentage gains since June, with the S&P 500 finishing up 4.8% for the week, the Nasdaq Composite jumping 5.2%, and the Russell 2000 gaining 3.6%. Stocks surged on Monday following solid earnings results and news that the U.K. government had abandoned an unpopular budget proposal. Tuesday through Thursday saw seesaw movement, but the rally reignited Friday after Federal Reserve Bank of San Francisco President Mary Daly said future interest rate increases could come in smaller increments to achieve the Fed’s target neutral rate. The yield on the 10-year Treasury retreated on Friday, but still finished up 20 basis points for the week at 4.21%, its highest level in fifteen years. The 10-2 spread narrowed 20 basis points to an inverted -28 basis points, and the dollar declined 1.4% after reaching a 20-year high the previous week.
Earnings season has been less dreary than feared, with about 20% of S&P 500 companies having reported results, more than 70% of those have shown a “positive” surprise in terms of earnings per share. Nevertheless, the results are modest with the blended earnings growth rate for the third quarter estimated to be 1.5% on 8.5% revenue growth as rising costs have eaten into profit margins. Fourth quarter earnings guidance revisions so far have been within the normal range, rather than the doom and gloom some market prognosticators had suggested.
On the Chicago sports scene, the Bulls are off to a rough start with injuries already taking their toll. Seems like back in the day, NBA players were rarely injured; for example, an examination of the Bulls stars of the early 1970s reveals that Chet Walker, Bob Love, and Jerry Sloan were all generally “healthy” in over 90% of the games during the season. “Butterbean” Love, who led the Bulls in scoring for six straight seasons, earned $105,000 in his highest paid year. This season, the Bulls are paying $57 million to just Zach LaVine and Lonzo Ball, both of whom seem plagued by recurring injuries.
Results Rolling In
During the upcoming week, 165 S&P 500 companies are scheduled to report results for the third quarter, including Alphabet (GOOGL), Microsoft Corp (MSFT), Meta Platforms Inc (META), Amazon Inc (AMZN), and Apple Inc (AAPL).
Data on Manufacturing, Housing, and Consumer Sentiment are all expected to show a slowing but stable economy. Later in the week, The Bureau of Economic Analysis will release its estimate of third quarter GDP which is forecasted to show an annual growth rate of 1.7%, following two quarters of contraction.
There are no scheduled Fed speakers, so hopefully the market can savor in last Friday’s spoonful of sugar without any talk of extra medicine.
Stocks on the Move
+19.7% Allied Motion Technologies Inc (AMOT) designs, manufactures, and sells motion control products into applications that serve various industry sectors. The Company supplies precision motion control components that incorporated into a number of end products, including high-definition printers, barcode scanners, surgical tools, robotic systems, wheelchairs, and weapon systems. There was no significant company news last week.
+17.7% The Eastern Company (EML) manufactures and markets a variety of locks and other specialty industrial hardware. The Company primarily offers locks and latches for truck bodies, computers, office equipment, and various applications for the electrical, automotive, and construction industries. Last week, EML said it sold its Argo EMS business for an undisclosed amount. Proceeds will be used to bring down debt. August Vlak, CEO, said, “The divestiture of Argo will further streamline our portfolio of businesses and build scale in our largest businesses, which we believe will accelerate Eastern’s growth and strengthen our operating margins.” Eastern has now completed the sale of all non-core businesses.
+10.3% Bank of America Corporation (BAC) operates as a bank. The Bank offers saving accounts, deposits, mortgage and construction loans, cash and wealth management, certificates of deposit, investment fund, credit and debit cards, insurance, mobile, and online banking services. The Corporation operates nearly 4,500 branch locations and 17,000 ATMs. Last week, Bank of America reported third quarter earnings of $0.81 per share which beat estimates by $0.03 per share due to the higher interest rate environment and strong consumer demand.
+11.6% Amazon.com Inc (AMZN) is an online retailer that offers a wide range of products. The Company products include books, music, computers, electronics, and numerous others. Amazon is also the dominant cloud services provider (through Amazon Web Services, or AWS), an influential entertainment company through its video streaming operations, a force to be reckoned with in grocery with its ownership of Whole Foods, and a leader in digital personal assistant devices (Alexa and Echo). There were many AMZN headlines last week, but the three most notable were: 1) “Amazon workers in Albany vote against unionization”; 2) “Amazon braces for $1B class action lawsuit focused on Buy Box”; and 3) “Hawaiian Airlines enters commercial deal to operate freighter aircraft for Amazon”.
+12.6% The Mosaic Company (MOS) is one of the world’s leading producers and marketers of concentrated phosphate and potash fertilizers and feed ingredients for the global agriculture industry. Mosaic was written up by Goldman Sachs strategist David Kostin in a discussion on screening for stress-tested, cheap cyclical stocks that are “attractive relative to recessionary earnings but also exhibit quality.”
+15.6% Freeport-McMoRan Inc (FCX) is a leading international mining company with headquarters in Phoenix, AZ. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold, and molybdenum. FCX rallied after a slim beat on third quarter earnings, which included commentary of the “strikingly tight” physical copper market from CEO Richard Adkerson.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.