The S&P 500 was down nearly 6% this week thanks to a combination of suprises. A hotter than expect inflation report showed an 8.3% rise in year over year inflation. The report eliminated hope that inflation was coming down quickly and the Fed would slow down the rapid increase in raising interest rates. Experts expected an 8% increase and stocks sold off as investors got spooked more economic damage will be necessary to bring inflation back in line. Later in the week, FedEx reported it was seeing a global slowdown of commerce and missed earnings estimates by 33%. The stock sold off 21% in response and investors reacted to the bellweather. Shares of UPS and Amazon also pulled back on the news.
Year to date, it's officially the worst year for the bond market in history, and it doesn't look likely to change until the Fed is done raising interest rates - or at least signals that the increases will pause. Investors of the TBT ETF which shorts the 20-year Treasury bill have benefitted this year, with the TBT up 65% year to date. It's market opposite, the TLT (long 20-year Treasuries), is down 26% over the same period. Looking forward, a TLT below 100 would present a good entry point for patient investors.
It wasn't all bad news for all companies. Energy companies have benefitted immensely from supply issues and continue to print money. Evolution Petroleum (EPM) increased earnings by 160% and increased revenue 64% just from the previous quarter. It also announced increases to its dividend program and its stock buyback program. Shares rose nearly 20% in response and the company made a new 3-year high. With no signs of a slowdown to the war and the economy still hot, the stock could continue to climb.
All investors will be once again listening to the Federal Reserve Chairman on the 21st of the month to learn how much the Fed will raise interest rates this session and how long they see the increases going. After saying we're all in for "some pain," it's not going to be good news and indexes have more to fall.
Play of the Week
NWFL: Dividend Increase
Norwood Financial Corporation, a bank holding company, announced a dividend of $.28 per share Friday. The $.28 per share equals the per share dividend declared in the prior quarter and represents a 7.7% increase over the cash dividend declared in the third quarter of 2021. As of June, Norwood's total assets equate to $2.066 billion, loans outstanding of $1.404 billion, total deposits of $1.800 billion, and total capital of $173.8 million. Net income was up 19% last quarter and the stock is up 7% YTD.
Event Impact: +5.26%
- Market Cap: 228.71 M
- Avg 30-Day Volume: 8.5 K
- Last Quarter's Revenue: 18.52 M
Did You Miss?
Amazon.com (AMZN): Worker Strike, Antitrust Lawsuit
It was a busy week at Amazon. Starting on Wednesday, California sues Amazon, alleging antitrust law violations. "In the lawsuit, California Attorney General Rob Bonta’s office said Amazon used contract provisions to effectively bar sellers from offering lower prices for products on non-Amazon sites, including on the sellers’ own websites" - from office.
- Event Impact: +1.36%
Thursday, hundreds of workers at an Amazon warehouse in Coventry begin a formal strike ballot, adding to a season of widespread industrial action across Britain.
- Event Impact: -1.77%
Class Action Lawsuit @Palantir
Pomerantz LLP announced Thursday that a class action lawsuit has been filed against Palantir Technologies Inc. ("Palantir" or the "Company") (NYSE:PLTR) and certain of its officers. Palantir builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. Once used for helping track down terrorist, Osama Bin Laden- their platforms are also widely used in the private sector.
The stock had been overvalued and overhyped by most measures, and a popular favorite on Reddit forums for the past two years. It's down 71% YTD with few tailwinds to turn around the plunge.
- Net Income: -179M ( -29%)
- Revenue (Last Q): 414M (+ 25%)
- Event Impact: -2.87%
How to profit when the market is crashing (part 1)?
There are many strategies to cover, but we believe the best way to profit is to stay in cash and trade events. On negative news days, when the entire market is looking bleak, the bearish scenarios on LevelFields will perform the best - these are events where the expected price direction for stocks impacted by those events is lower. Traders can magnify profits by shorting stocks or buying put options on these types of events.
There are ETFs like TBT and SQQQ that we've mentioned which also short stocks or groups of stocks. They are easier to trade but require some understanding of the fact they should be used for short term trades only.
On positive news days, the bullish scenarios will perform better. Futures markets will indicate the sentiment pre-market, but it's likely to change on major news like Fed actions, CPI reports, or policy shifts from governments.
Notable Earnings Announcements This Week
- AutoZone (AZO)
- A stock that performs well in recessions
- Stitch Fix (SFIX)
- A company under pressure to turn around performance
- Lennar (LEN)
- A homes builder
- Costco Wholesale (COST)
- A likely winner of a strong U.S. dollar as it purchases goods globally for sale in the U.S.
- September 21:
- Fed Interest Rate Decision (2p.m est.)
- September 22:
- Bank of England Interest Rate Decision
The LevelFields Team