Must Read: Quant Ratings Updated on 96 Stocks Dear Reader, Last week, NVIDIA Corporation’s (NVDA) quarterly earnings announcement served as the grand finale to the first-quarter earnings season. And what a finale it was… The AI chip giant achieved a revenue growth rate of 262% and an earnings growth rate of 462% compared to the previous year. Not only did the company post a 9.5% earnings surprise, but it also increased its guidance for the second quarter. The company now expects second-quarter revenue to soar 171.8% year-over-year to $28.0 billion. This week, however, the stock market is turning its attention back to inflation. That’s because, on Friday, we’ll get a fresh look at the Personal Consumption Expenditures (PCE) index. So, in today’s Market 360, we’ll preview what to expect from the upcoming PCE report. We’ll also discuss why April’s numbers are particularly important as the Federal Reserve mulls over potential key interest rate cuts later this year. Then, I’ll share how you can prepare for potential volatility ahead by ensuring that your portfolio is full of fundamentally superior stocks... All Eyes on Inflation (Again) Now, Friday’s PCE reading will be crucial because other recent inflation and economic reports have come in hotter than expected.
Economists are expecting the PCE to rise 0.3% in April, or 2.7% year-over-year. If those forecasts are accurate, they would be in line with March’s readings. Core PCE, which excludes food and energy, is expected to post a 0.2% increase for April – compared to 0.3% in March. As a reminder, the “core” component of the PCE is the Federal Reserve’s preferred measure of inflation.
It’s worth noting that some Fed members have grown more hawkish in their comments. For example, Minneapolis Federal Reserve President Neel Kashkari said this morning that it would take “many more months” of cooler inflation data to convince him to support a key interest rate cut. I do not happen to agree with Kashkari in this case. But I do like him, and despite not having a vote this year, he is seen as a potential future Fed Chair – so he has a lot of influence with other Fed members.
Overall, Wall Street has grown more cautious in its outlook on key interest rate cuts this year. According to the CME FedWatch Tool, investors are betting on a coin flip that rates will remain unchanged at the Fed’s September meeting. However, the Fed is notorious for cutting before Presidential elections because it does not want to be part of the political debate.
We will see if Friday’s report significantly changes the calculus. Beyond that, we also have the Fed’s updated “dot plot” on June 12th, which should provide more clues. This Week’s Ratings Changes The bottom line is that the time when markets behave rationally (earnings season) is effectively complete. And now, we’re entering the time of year when emotions control investor behavior. What’s more, the market makers like Citadel tend to employ what I call mean reversion trading during this time. As a result, what was once up is down and what was down is up for a while. So, I think it is fair to say we can expect some volatility this week. And to prepare for this, I went ahead and took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 96 big blue chips. Of these 96 stocks... - 17 stocks were upgraded from a Buy (B-rating) to a Strong Buy (A-rating)
- 25 stocks were upgraded from a Hold (C-rating) to a Buy (B-rating)
- 13 stocks were upgraded from a Sell (D-rating) to a Hold
- 19 were downgraded from a Buy to a Hold
- 22 stocks were downgraded from a Hold to a Sell
- And only four stocks were downgraded from a Sell to a Strong Sell (F-rating)
I’ve listed the first 10 stocks rated as a Sell below, but you can find a more comprehensive 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. | ACN | Accenture Plc Class A | D | | ADBE | Adobe Inc. | D | | BABA | Alibaba Group Holding Limited Sponsored ADR | D | | BBY | Best Buy Co., Inc. | D | | BLK | BlackRock, Inc. | D | | ELS | Equity LifeStyle Properties, Inc. | D | | ENTG | Entegris, Inc. | D | | EXC | Exelon Corporation | D | | F | Ford Motor Company | D | | FND | Floor & Decor Holdings, Inc. Class A | D | Prepare for What’s Next Aside from the upcoming inflation news, there are some big potential shocks that we need to keep an eye on in June. I may touch on these in a future Market 360 article, but I want to stress that our best defense always remains a strong offense of fundamentally superior stocks. For example, our Growth Investor stocks are currently characterized by 17.3% average forecasted sales growth and 182.8% average forecasted earnings growth. So, no matter what happens in the coming weeks, our Growth Investor stocks should remain the new market leaders and continue to steadily prosper. In the meantime, if you want to find the “next NVIDIA,” I have some news you may not like hearing... FactSet recently did a search for the term “AI” in the transcripts of all the S&P 500 companies during the recent first-quarter earnings season. Of these companies, it found that 199 used the term “AI” – a new high. What’s more, there are now approximately 70,000 “AI” companies worldwide. Why does this matter? It’s clear that the AI boom has reached a fever pitch. And while I’m a long-term believer in AI, I’m willing to bet that more than a few of these companies claiming to be involved with AI are pure garbage. That means trying to find the next NVIDIA is like trying to find a needle in a haystack. So, instead of trying to pick winners and losers, why not pocket a steady stream of income as the entire AI industry grows exponentially? You can do just that, thanks to a unique strategy that’s been around for decades. I call it the “AI Retirement Formula.” It allows you the chance to earn a series of retirement-boosting payouts from the success of over 10,000 companies. I just shared the details of this strategy with my Growth Investor subscribers. And you can start using this as soon as today without taking on any unnecessary risks. Click here to learn more about the AI Retirement Formula today.
(Already a Growth Investor subscriber? Click here to log into the members-only website now.) Sincerely, | 
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