With highly promising news over the last week that the worst of the inflation peak may be in the past, stocks soared on Friday, ending up one of the most bullish weeks since late 2021. The beaten-down tech names led the charge, with the NASDAQ up 2.1% on Friday closing above the 13,000 level. Apple, Inc. (AAPL) was up 2% following news reports of strong iPhone sales going into September when new higher-priced phones will be released.
The S&P 500 surged 1.7% and now stands at 4,280, which means that it has recouped 50% of the bear market decline in 2022.
In the previous bear market cycles of 2001 and 2008, there were several false recoveries before prices finally stabilized. Michael Burry - the hedge fund manager made famous by the movie The Big Short - noted on Twitter last week that the average bear market bounce is 23% and this bounce just hit that mark. His Tweet was meant as a warning to those getting too enthused about the rally.
On the other end of the spectrum, Bloomberg reported that the "smart money" was getting back into the market at rates last seen in mid-2020. The Smart Money denotes cash inflows at the end of the trading day, which has been correlated to institutional trading.
Some institutional investors are taking a wait-and-see approach. Seeing the glass as half empty, Ark Invest’s (ARKK) Cathie Wood thinks the Fed will have to start cutting rates before year end to address a recession. In a post on Twitter, she commented, “We're getting all kinds of signals that the economy is fragile,” pointing out that the labor market may not be as strong as the headline numbers suggest. “ We are hearing one layoff after another.”
A variety of data releases over the last week all showed that prices were finally starting to cool down. Last Wednesday, the closely watched Consumer Price Index (CPI), the leading indicator of inflation, was flat for July, Annualized inflation is now peaking at 8.5% - under consensus estimates. The producer price index (PPI) actually showed a decline of 0.50% over the last month compared to the previous consensus estimates of a 0.2% increase.
On top of the unexpected monthly fall in the PPI, data released on Friday showed a decline in import prices, which includes imported energy, by 1.4%, the first decline in 2022 and the most significant monthly drop since the Covid shutdown began in April 2020.
Play of the Week
The LevelFields platform reported 14 companies announcing a stock buyback over the last week with an average one-day event impact of +7.59%. The tax preparation firm H&R Block (HRB) led the performance table, with a one-day surge of 15.29%.
- HRB’s full-year results for 2022 beat its prior revenue and earnings estimates.
- After completing share repurchases of $550 million, retiring 13% of its total shares outstanding, HRB announced a new share repurchase program of $1.25 billion available through 2025.
- On top of the share repurchase, HRB also announced a 7% increase in its dividend to $0.29 per share.
H&R Block: Stock buyback and dividend increase
Did You Miss?
The LevelFields platform reported 15 companies, including HRB, announcing a dividend increase with an average event impact of 3.3%. Leading the pack was Broadridge Financial Solutions, (BR) with a one-day gain of 8%.
- Total revenues for the quarter increased 12%, and recurring fee revenues increased 15%, both well above guidance set back in the previous quarter.
- With the Board approving a 13% increase in their dividend, Broadridge has now increased its dividend for 16 consecutive years.
Broadridge: Beats consensus earnings and raises dividend again
Where Are They Now?
Earlier this month, on August 4th, the LevelFields platform reported that SeaWorld Entertainment, Inc., (SEAS), a leading theme park operator, announced a new share repurchase program amounting to $250 million. The one-day event impact boosted the share price by 4.16%.
Since then, on the back of announcing strong growth above analyst expectations in both attendance and revenue, the Orlando, Florida-based mid-cap company has come onto the radar screen of institutional investors. SeaWorld share price continues to rally.
While foreign visitor numbers had fallen on a year-to-year basis, total visits have increased by some 20.5%. Management had earlier indicated that while numbers were stronger from the last year, they still fully anticipate further double-digit upside growth. Their parks were still far from full capacity and the post-Covid vacation travel boom was fast gaining momentum.
Further, in Florida, the location of SeaWorld’s main park, the economy is experiencing a boom with a steady increase of consumers visiting or relocating permanently to the state. Almost all sectors, especially tourist and travel-related businesses such as hotels, restaurants, and real estate, have seen top-line revenues meet or beat pre-Covid shutdown levels.
SeaWorld: Riding the wave of a consumer travel boom
Highlights from the LevelFields Calendars section and beyond.
Nutribrand, Inc. (NTRBW)
Notable Earnings Releases:
Monday, Aug 15
Li Auto, Inc. (LI), Abcam, plc(ABCM), DXP Enterprises, Inc. (DXPE), Mitsubishi Heavy Industries, Ltd. (MHVYF), Tokyo Electron (TOELY), Telecom Argentina S.A. (TEO).
Tuesday, Aug 16
Home Depot, Inc. HD), Sea Limited (SE), Elbit Systems, Ltd. (ESLT), Janus International Group (JBI), Softbank Group Corp. (SFTBY), Ashtead Group plc (ASHTY), City Developments Ltd. (CDEVY).
Weds, Aug. 17
Target Corp. (TGT), TJX Companies, Inc. (TJX), Krispy Kreme, Inc. (DNUT), Koninklijke Ahold Delhaize N.V. (ADRNY), E.ON SE (EONGY), Vestas Wind Systems (VWDRY), Bridgestone Corp. (BRDCY).
Thursday, Aug. 18
Kohl’s Corporation (KSS), BJ’s Wholesale Club, Inc. (BJ), Estee Lauder Corporation (EL), MoneyGram International Inc. (MGI), Samsonite International, Inc. (SMSEY), Continental AG (CTTAY), H & M Hennes & Mauritz AB (HNNMY).
Friday, Aug. 19
Deere & Company (DE), Foot Locker, Inc. (FL), Holcim, Ltd. (HCMLY), Fuji Films Holdings, Corp. (FUJIY), IOCHPE-MAXION (IOCJY).
The LevelFields Team