Optimism is spreading throughout Wall Street, as investors continue to cheer positive quarterly results, better-than-expected inflation data and a rosier economic outlook. In fact, the S&P 500, Dow and NASDAQ climbed more than 3% higher last week.
The reality is the second-quarter earnings season is proving to be a strong one. 87% of S&P 500 companies have reported their latest quarterly results, and, according to FactSet, 75% have posted an earnings surprise and 70% have posted a revenue surprise. In addition, the current earnings growth rate now stands at 6.7% and the revenue growth rate is 13.6%.
As I mentioned last week, the Consumer Price Index (CPI) was unchanged at 0% in July, which was much better than economists’ consensus expectation of a 0.2%. In the past 12 months, the CPI decelerated from a 9.1% annual pace in June to an 8.5% annual pace in July. The core CPI, which excludes food and energy, rose 0.3% in July and 5.9% in the past 12 months.
The Producer Price Index (PPI) also showed that inflation is tapping the brakes. For July, the PPI declined 0.5%, which was substantially better than economists’ estimates and represented the first monthly PPI since April 2020. I should also add that wholesale energy inflation plunged 9% in July and was the primary reason that the PPI dipped. The core PPI, which excludes food, energy and trade margins, rose 0.2% in July. In the past 12 months, the PPI and core PPI have risen 9.8% and 5.8%, respectively.
And in regard to the rosier economic outlook, the Atlanta Fed revised its third-quarter GDP estimate up to a 2.5% annual pace, up from its previous estimate for a 1.4% annual pace.
This is all great news, so it’s really no surprise that the market rallied last week.
While investors are beginning to pour back into the market, it doesn’t mean that all stocks are great buys right now. In fact, after taking a close look at the latest data on institutional buying pressure and each company’s fundamental health in Portfolio Grader on 85 blue chip stocks over the weekend, 29 stocks were downgraded from a Buy (B-rating) to a Hold (C-rating) and another 29 stocks were downgraded from a Hold to a Sell (D-rating).
I’ve included the first 10 stocks that were downgraded from a Buy to a Hold below, but you can click here to find the full list of 85 stocks – including their Fundamental Grade and Quantitative Grade. 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 act accordingly.
|Ticker||Company Name||Total Grade|
|ACI||Albertsons Companies, Inc. Class A||C|
|DDOG||Datadog Inc Class A||C|
|DEO||Diageo plc Sponsored ADR||C|
|MDLZ||Mondelez International, Inc. Class A||C|
|MLM||Martin Marietta Materials, Inc.||C|
|NSC||Norfolk Southern Corporation||C|
In the coming weeks, the best stocks to buy may come from a historic new product demo in Houston, Texas, that could reshape the market and create millionaires on just a single investment.
It’s something legendary investor Whitney Tilson, dubbed “The Prophet” by CNBC for correctly predicting major market moves like the dot-com collapse, the 2008 financial crisis, the bottom of the market after the 2008 crash on 60 Minutes, and I have been discussing for a while now.
We both agree that if you wait until the big unveiling on August 29, the market could surge so quickly you won’t have another chance to get in this cheaply. So, it’s critical you take your position soon.
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