Quant Ratings Updated on 84 Stocks Dear Reader, Yesterday was a big news day for the Federal Reserve, and also the market.
The Fed concluded its latest FOMC meeting, opting to leave key interest rates unchanged. Now, that was expected, of course. But in light of recent inflation data, what investors were really looking for was any clues into the Fed’s thinking around future rate cuts.
Remember, we’ve had three straight months of disappointing inflation data. Most recently, last Friday the core Personal Consumption Expenditures (PCE) index, which excludes food and energy, rose 2.8% in March over the previous year. That’s above estimates for 2.7% and equal to the rate seen in February.
So Wall Street was on pins and needles waiting for the Fed’s announcement, as well as Fed Chair Jerome Powell’s press conference later that afternoon.
In the FOMC statement, the Fed noted that there has been “a lack of further progress” on inflation declining to its 2% annual target. It also said the risks to achieving its employment and inflation goals have moved towards a better balance over the past year.
Now, if that sounds like the Fed is talking out of both sides of its mouth, that’s because it is. But essentially it means the Fed still thinks it is achieving its goal.
I should also mention that Jerome Powell has a bad habit of putting his foot in his mouth during his afternoon press conferences, which have historically spooked the markets. But this time around, he actually bolstered them quite a bit. In his press conference, Powell reassured any fears of a potential rate hike in the face of the pesky inflation data, saying it was “unlikely.” Overall, Powell made it clear that the Fed would more likely ease than tighten further. As a result, the 10-year Treasury note dropped under 4.6% – its lowest level in over a week, and the stock market staged a big reversal.
I should add that Powell struck an even more doveish tone than the statement itself. So, the big question now is: Are enough of the other Fed members “riding herd” with Powell to get a rate cut done later this year? The fear that they are not could be why the market gave up some of its powerful gains in the last hour of trading yesterday.
All in all, it was a good day for the Fed. Investors wanted clarity from Powell, and they got some yesterday. Now, looking ahead, the markets are pricing in one rate cut this year, probably sometime after July. According to the CME FedWatch tool, futures markets are predicting a 53.8% chance that key interest rates rate will be lower in September.
Personally, I believe that the Fed wants to stay out of the crosshairs and would prefer to cut rates before the election.. But the bottom line is that rate cuts are coming. This Week’s Ratings Changes Now, I don’t want you to get too distracted by what’s going on with the Fed. The simple fact is the primary catalyst for the stock market remains quarterly earnings announcements.
So far, first-quarter earnings have been solid, with S&P 500 companies on track for 3.5% earnings growth. We’ll hear from 175 companies in the S&P 500 this week, which is about the halfway point of the earnings season.
What’s more, the earnings environment will continue to improve throughout the year. Analysts’ current expectations call for the S&P 500 to achieve 9.7%, 8.6% and 17.3% average earnings growth in the second quarter, third quarter and fourth quarter of 2024, respectively.
To position your portfolio to prosper from this year’s positive earnings environment, you need to own fundamentally superior stocks with growing institutional buying pressure. These are the stocks that are most likely to beat their earnings estimates and pop on the news. And you’ll want to avoid the stocks that don’t.
So, to help weed out these stocks, I took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 84 big blue chips. Of these 84 stocks, 19 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 20 stocks were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks rated as a Sell below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly. | BAM | Brookfield Asset Management Ltd. Class A | D | | BMO | Bank of Montreal | D | | BMRN | BioMarin Pharmaceutical Inc. | D | | CMCSA | Comcast Corporation Class A | D | | EIX | Edison International | D | | EQIX | Equinix, Inc. | D | | FLUT | Flutter Entertainment Plc | D | | FMS | Fresenius Medical Care AG Sponsored ADR | D | | GGG | Graco Inc. | D | | GIB | CGI Inc. Class A | D | The Next Tech Sector Leader? Folks, we still have a ways to go with the first quarter earnings season. Plus, we should have an improving earnings picture through the rest of the year. So now is a perfect time to load up your portfolio with these fundamentally superior stocks.
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(Already a Growth Investor subscriber? Click here to log into the members-only website now.) Sincerely, |
| Louis Navellier
Editor, Market 360
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NVIDIA Corporation (NVDA) |
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