Wall Street was a bit grumpy on Monday following the long holiday weekend. The reality is investors were still digesting last Friday’s payroll report. The Labor Department announced that 236,000 payroll jobs were created in March, which was essentially in line with economists’ consensus estimate of 239,000.
The January payroll report was revised down to 472,000, which is down from the 504,000 previously reported. The February payroll was revised up to 326,000, which is up from the 311,000 previously reported. The unemployment rate slipped to 3.5% in March, down slightly from 3.6% in February. Labor force participation rose to 62.6%, which is the highest level in three years as workers over 55 years old increased.
Interestingly, the average workweek declined to 34.4 hours, which is the lowest level since the pandemic. Average hourly earnings rose 0.3% in March to $33.18 per hour. In the past 12 months, average hourly earnings rose 4.2% and failed to keep pace with inflation.
Overall, the payroll report was indicative that payroll job growth is slowing, but that more older workers are seeking jobs, since inflation is eroding purchasing power.
The payroll data comes on the heels of last Wednesday’s ADP payroll report, which saw private payrolls rise by just 145,000 in March. This is down from a revised 261,000 in February.
Investors remained on edge today, but given the slew of economic data we’re going to receive this week, it’s no surprise that they’re a little nervous. So, in today’s Market 360, we’ll review the big economic reports that are on deck this week, and I’ll share how to best position your portfolio ahead of their release…
Three Key Economic Reports to Watch
Tomorrow, we’ll receive the Consumer Price Index (CPI) reading for March. Economists anticipate CPI to rise 0.4% month-over-month and 6% year-over-year. Core CPI, which excludes food and energy, is expected to increase 0.5% month-over-month and 5.5% year-over-year.
The Producer Price Index (PPI) report for March will be announced on Thursday. PPI is forecast to decline 0.1% in March, while core PPI, which excludes food, energy and trade, is forecast to increase 0.2%. PPI is expected to increase 4.6% year-over-year and PPI is expected to rise 4.4% year-over-year.
The March retail sales report rounds out the week, as it’s scheduled to be released Friday morning. Retail sales are anticipated to increase 0.4%. Excluding automobile, sales are projected to decrease 0.1%.
While the Federal Reserve signaled at its March Federal Open Market Committee (FOMC) meeting that it is nearing the end of its rate hike cycle, it will still be watching the economic data closely. So, if any inflation comes in hotter than anticipated or retail sales that are deemed “too strong” by Wall Street, rate-hike fears may be reignited.
First-Quarter Earnings Season Begins
In addition to the March retail sales report on Friday, Friday will also mark the official start of the first-quarter earnings announcement season, with the big banks on deck to unveil their latest quarterly results. Last Friday, I previewed the big banks’ earnings reports. On Saturday, I’ll review their earnings, so keep an eye on your inbox for that! Let me say now that I expect Wall Street to be more interested in the banks’ guidance and loan losses, rather than just their earnings. Regardless, I still do not view any of the big banks buys ahead of their earnings releases on Friday.
Overall, the first-quarter earnings season is expected to be a weak one. According to FactSet, the S&P 500 is expected to report a 6.8% decline in first-quarter earnings growth and 1.8% average revenue growth. So, it’s critical to invest in fundamentally superior companies, i.e., companies that are growing their sales and revenue at a strong clip, in the current market environment.
So, after taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for 70 big blue chips. 41 were downgraded to a “Hold” (C-rating) or “Sell” (D-rating) and are not the stocks you want in your portfolio ahead of the first-quarter earnings season.
I’ve listed the first 10 stocks that were downgraded to a D-rating below, but you can find the full list – including their 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 act accordingly.
This Week’s Ratings Changes
|Ticker||Company Name||Total Grade|
|BIO||Bio-Rad Laboratories, Inc. Class A||D|
|BRK.B||Berkshire Hathaway Inc. Class B||D|
|CRL||Charles River Laboratories International, Inc.||D|
|CRWD||CrowdStrike Holdings, Inc. Class A||D|
|IQV||IQVIA Holdings Inc||D|
|RCI||Rogers Communications Inc. Class B||D|
|SPGI||S&P Global, Inc.||D|
To be successful in the current market, you want to be invested in fundamentally superior stocks, as these are the companies that are well-positioned to emerge as the new market leaders as the first-quarter earnings season gets underway.
If you’re not sure where to look, then consider my Growth Investor service. My average Growth Investor stock is characterized by 39.2% average annual sales growth and 292.1% average annual earnings growth. In addition, my average earnings surprise was 7.9% in the previous quarter, and due to positive analyst earnings revisions, plus expanding operating margins, I expect wave-after-wave of positive surprises in the first-quarter earnings season, too.
I should also add that my average Growth Investor stock’s dividend has increased a whopping 166.3% in the past year! The average dividend yield now stands at about 3.79%.
So, I am very confident that my Growth Investor stocks are poised to outperform in the coming weeks and months.
If you want to set your portfolio up for success, then join me at Growth Investor. Once you do, you’ll have full access to my latest Monthly Issues, Weekly Updates, Special Market Podcasts and much more!
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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Bunge Limited (BG)