There are a lot of interest rate jitters going through the markets following last week’s big news.
And it’s no secret what the big news was: The 10-year Treasury yield moved decisively above the 4.0% level for the first time this year. It broke above 4.0% on Wednesday afternoon and continue to push above this level in trading on Thursday.
The recent rise in Treasury yields comes on the heels of persistent inflation fears. So the big debate now is whether the Fed will increase rates by 0.25% or 0.50% at its March Federal Open Market Committee (FOMC) meeting.
Stocks chopped around on the Treasury yield’s moves last week, and volatility returned today when Federal Reserve Chairman Jerome Powell kicked off his Congressional testimony on monetary policy to the U.S. Senate Banking Committee this morning (and will continue tomorrow).
So, in today’s Market 360, we’ll consider what Wall Street wants to hear from Powell, as well as why Friday’s February payroll report could impact market direction. I’ll also share how to best position your portfolio for what could be a very volatile week.
The Important Economic News
Regarding Powell, Wall Street is looking for dovish phrases, like “data dependent,” or clues as to when the Fed will stop its rate hike cycle. As of this writing, Powell’s testimony isn’t very dovish. He noted that bringing inflation back down to the Fed’s 2% mandate would be “bumpy.” He also stated:
The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. … If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.
This is why Friday’s February payroll report is important to Wall Street. The report reveals how many people are looking for and need jobs, as well as wage trends. As such, it also tends to weigh on the Federal Reserve’s decision on whether to raise key interest rates.
Economists currently expect that 200,000 jobs were added in February, well below the 517,000 jobs added in January. The unemployment rate is expected to hold at 3.4%, its lowest level since 1969. Not to sound like a conspiracy theorist, but I do not trust the January payroll due to “positive” seasonal adjustments, so I expect a significant downward adjustment. If the January report is revised lower, then this would take a lot of pressure off of interest rates.
I’ll further discuss Powell’s testimony and the big jobs report in Friday’s Market 360. Today, I want us to focus on the latest Portfolio Grader upgrades and downgrades to prepare for the busy week ahead…
This Week’s Ratings Changes
I took a closer look at the latest institutional buying pressure and each company’s fundamental health and revised my Portfolio Grader recommendations for 157 blue-chip stocks. 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.
I’ve included the first 10 stocks that were downgraded from a Buy (B-rating) to a Hold (C-rating) in the chart below, but for the full list of 157 stocks – including their Fundamental and Quantitative Grades – click here.
|Ticker||Company Name||Total Grade|
|AEP||American Electric Power Company, Inc.||C|
|ALLE||Allegion Public Limited Company||C|
|ATO||Atmos Energy Corporation||C|
|BCH||Banco de Chile Sponsored ADR||C|
|BMY||Bristol-Myers Squibb Company||C|
|CF||CF Industries Holdings, Inc.||C|
|CHWY||Chewy, Inc. Class A||C|
|CNP||CenterPoint Energy, Inc.||C|
It’s a fascinating environment we are in right now, and if you want to be successful, it’s important to invest in companies that can maintain robust earnings and sales growth, as well as benefit from positive analyst estimates. These are the stocks that are well-positioned to prosper – no matter which way the market turns next. The fact of the matter is the market has narrowed and we remain in a 15% market, where only the top 15% of the stocks in Portfolio Grader have emerged as market leaders.
So, stock picking is crucial in this environment.
Fortunately, at Growth Investor, we’ve taken steps to align our Buy List to prosper in the current environment, as we’ve loaded up on companies with accelerating earnings and sales momentum.
If you become a member now, you’ll have access to two Buy Lists: my High-Growth Investments and Elite Dividend Payers. I also include a Top Stocks list, which is a select list of stocks from my Buy Lists that are backed by persistent institutional buying pressure and stunning fundamentals that should be go-to names for investors in the coming weeks and months.
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