Trading Opportunities: How to Prep for the Fed’s Announcement

Did support on the S&P 500 break? Yes… kind of. The market closed at 3,899 Monday and seems to be holding. The main question is how the Federal Open Market Committee’s announcement tomorrow will affect the market. We’re pretty sure we know that they’ll raise interest rates 0.75% as expected.

In this week’s livestream, we can offer some reassurance as to why we don’t expect the Fed to raise rates any more than that. However, traders are in a little bit of limbo. But again, we are optimistic that the Fed will meet expectations on Wednesday and that stocks have a good chance of rallying into Friday. Until the announcement is out, aimless volatile trading is the most likely outcome.

Tech, Tesla, and Social Media

This week, we addressed the questions of some worried traders in light of the Fed announcement, plus we discussed some interesting viewer questions about specific stocks. If you have questions of your own, just drop a line in the comments section or email us at feedback@investorplace.com.

  1. Can we take a look at Microsoft? – John P.
  2. Tesla has been relatively strong lately compared to other stocks in the tech sector. What are your thoughts on Tesla to the upside? – Steven G.
  3. Can you comment on Adobe and the recent purchase of (private technology company) Figma? – Kristen J.
  4. What about Twitter and other social media? Do you find it useful for market analysis? – Greg B.

 


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Stocks Drop on Disappointing Retail Sales

In last weekend’s livestream, we covered a dismal FedEx Corp. (FDX) earnings release and the market’s reaction to some varied retail reports.

FedEx delivered a poor earnings report after Thursday’s closing bell. The delivery company will be taking cost-cutting measures, including grounding planes, making fewer Sunday deliveries, and closing corporate offices. Because consumers have been spending less online, FedEx has taken a hit. Other delivery companies like United Parcel Service Inc. (UPS) took a sympathetic hit, but the market seems to have rebounded this week. FedEx was up 1% Monday after taking a 21% hit Friday after releasing earnings.

To add to FedEx’s misery, the Consumer Price Index (CPI) data was released late last week. Consumers account for 70% of the U.S. economy, and their budgets are getting squeezed by inflation, which has been retreating ever so slowly. Overall prices decreased 0.2% from July but are up 8.3% from the same time last year. Stubborn high prices mean less spending, and if consumers aren’t spending, the U.S. economy may not enjoy a soft landing as the Fed raises interest rates to fight inflation.

The University of Michigan’s Consumer Confidence Index came in on a slightly more positive note Friday at 59.5, higher than the 58.2 August measurement, but a bit below the market expectation of 60. The index gauges consumer sentiment about inflation, prices, and spending. It seems consumers are more optimistic about the prospect of inflation putting a damper on spending than they were when gas prices peaked earlier in the summer, which is good news. We are expecting a promising earnings report this week from Costco Wholesale Corp. (COST), one of the consumer defensive stocks we like. It should tell us a bit more about consumer spending as we await other reports in the sector.

The market is rolling with the punches and holding its own, thankfully, hovering around support at 3,900. That means we’re still not in bear-market territory for the near future. You always hear us saying to buy on the dips, and we’re sticking with that. These are the windows that create buying opportunities.

Sincerely,

John Jagerson & Wade Hansen

Editors, Trading Opportunities

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