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Stocks Rebound From 2-Year Low

TUESDAY – Stocks rose Tuesday, as the Dow Jones Industrial Average and S&P 500 bounced back from their lowest closing levels in nearly two years.

The British pound rebounded slightly after plunging to a record low against the dollar earlier in the week. Sterling traded more than 1% higher at $1.087 per dollar after hitting an all-time low of $1.0382.

Treasury yields also came off their highs, boosting sentiment. The benchmark 10-year yield dipped nearly 5 basis points to 3.823%.

Chicago Federal Reserve President Charles Evans signaled some apprehension about the central bank raising rates too quickly to fight inflation, in contrast to a slew of Fed officials who recently reiterated a tough stance against rising prices.

The move comes after five straight days of losses for stocks, with the S&P 500 closing at its lowest level since 2020. The Dow dropped more than 300 points on Monday, putting it in a bear market after falling more than 20% below its record high. The 30-stock average also posted its lowest closing level since late 2020.

Technical indicators show that the selling has been historic. According to Bespoke Investment Group, the 10-day advance decline line for the S&P 500 has hit a record low, meaning market breadth is at its worst level in at least 32 years.

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Dow Starts Monday Off Lower

MONDAY – The Dow Jones Industrial Average declined on Monday as surging interest rates and foreign currency turmoil pressured markets.

The British pound dropped to a record low on Monday against the U.S. dollar. Sterling at one point fell 4% to an all-time low of $1.0382. The Federal Reserve’s aggressive hiking campaign, coupled with U.K.’s tax cuts announced last week has caused the U.S. dollar to surge. The euro hit the lowest vs. the dollar since 2002. A surging greenback can hurt the profits of U.S. multinationals and also wreak havoc on global trade, with so much of it transacted in dollars.

Traders will be closely watching the S&P 500 on Monday for any break below its bear market low. The S&P’s low close for the year in June was 3,666.77. It closed Friday at 3,693.23 after trading briefly below that close. The benchmark’s intraday low for the year is 3,636.87. Any trade below those levels could drive more selling in the market.

On Friday, stocks ended a brutal week with the blue-chip Dow finding a new intraday low for the year and closing lower by 486 points. The broad-market S&P 500 temporarily broke below its June closing low and ended down 1.7%. The tech-heavy Nasdaq Composite lost 1.8%.

Another super-sized rate hike by the Federal Reserve last week was the catalyst for the latest leg downward in markets. The central bank indicated it could raise rates as high as 4.6% before pulling back. The forecast also shows the Fed plans be aggressive this year, hiking rates to 4.4% before 2022 ends.

Bond yields soared after the Fed enacted another rate hike of 75 basis points. The 2-year and 10-year Treasury rates hit highs not seen in over a decade. On Friday, Goldman Sachs slashed its year-end target for the S&P 500 to 3,600 from 4,300.

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Stocks Tumble Again

MONDAY – U.S. stocks dropped on Monday morning, putting the S&P 500 on track to fall back into bear market territory and possibly to a new low for 2022. A jump in short-term rates drove the negative sentiment as investors still reeling from a hotter-than-expected inflation report on Friday braced for the Federal Reserve to raise rates later in the week.

The short-term 2-year Treasury yield rose by 17 basis points to more than 3.22% Monday, reaching its highest level since 2007 as investors bet the Fed may have to get even more aggressive to squash inflation. At one point in the session, the 2-year rate traded above its 10-year counterpart for the first time since April, a so-called yield curve inversion seen as an indicator of a recession.

The major averages last week posted their biggest weekly declines since late January as investors grew increasingly concerned rising inflation will tip the economy into a recession. The Dow and S&P 500 fell 4.6% and 5.1%, respectively, while the Nasdaq Composite lost 5.6%. A chunk of those losses came Friday, when hotter-than-expected U.S. inflation data spooked investors. The Dow dropped 880 points, or 2.7%. The S&P 500 and Nasdaq lost 2.9% and 3.5%, respectively.

The Bureau of Labor Statistics reported Friday that the U.S. consumer price index rose last month by 8.6% from a year ago, its fastest increase since December 1981. That gain topped economists’ expectations. The so-called core CPI, which strips out food and energy prices, also came in above estimates at 6%.

On top of that, the preliminary June reading for the University of Michigan’s consumer sentiment index registered at a record low of 50.2.

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Stocks Start Week Flat

MONDAY – Stocks were flat Monday morning as the 10-year Treasury yield hit a new three-year high and a week of major first-quarter earnings reports kicked off.

The 10-year Treasury yield reached on Monday it highest level since late 2018, trading at 2.884% at one point. The yield was at 1.71% to begin March, but has shot higher as the Federal Reserve pivoted to a more aggressive tightening stance. That change has weighed on stocks and triggered concerns about an impending recession.

Several Dow blue-chip names report earnings this week, including IBM, Procter and Gamble, Travelers, Dow Inc, Johnson and Johnson, American Express and Verizon.

Technology bellwethers are also set to report quarterly earnings, with Netflix due on Tuesday and Tesla out on Wednesday. Snap reports Thursday. United Airlines, American Airlines and Alaska Air are also on the calendar, as are railroads CSX and Union Pacific.

Investors will be paying close attention to forward guidance, especially for comments on how companies are handling surging costs. March’s consumer price index reading released last week showed an 8.5% increase from a year ago, the fastest annual gain since December 1981.

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Stocks Flat To Start Earnings Season

WEDNESDAY – Stocks were flat on Wednesday as traders weighed more surging inflation numbers and lackluster results from JPMorgan Chase to kick off the first quarter earnings reporting season.

First quarter earnings reporting season kicked off Wednesday and analysts have tempered their expectations amid rising commodity costs, the war in Ukraine and the lingering pandemic. Earnings for S&P 500 companies are expected to increase just 4.5% in the period, the lowest growth since the fourth quarter of the pandemic-plagued 2020, according to FactSet.

On Wednesday a report showed producer prices, wholesale costs that could eventually lead to higher retail prices, jumped a record 11.2% in March on an annual basis. The monthly gain of 1.4% topped the 1.1% estimate from economists polled by Dow Jones.

The 10-year Treasury yield rose slightly to 2.74% following the producer prices report. The yield touched a three-year high of 2.82% this week before pulling back.

The producer prices report followed the consumer prices gauge released on Tuesday which showed an 8.5% surge in March, the Labor Department said on Tuesday. The report fueled further concerns of tighter monetary policy from the Federal Reserve, even as core CPI excluding food and energy costs rose 0.3%, slightly below expectations. Some on Wall Street saw this as a sign that inflation may be nearing a peak.

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Stocks Flat To Close Losing Week

FRIDAY – Stocks were flat on Friday and the market headed for a losing week as investors braced for tighter monetary policy from the Federal Reserve.

Despite a small rebound Thursday and Friday’s early gains, the major averages were headed for weekly declines. The S&P 500 and Nasdaq were down 1% and 2.6%, respectively, for the week through Thursday’s close. The Dow was down 0.7% week to date. Those losses would mark the first weekly losses for the S&P 500 and Nasdaq in four weeks. Meanwhile, the Dow is headed for back-to-back weekly declines.

The losses have been driven by a change of tone by the Federal Reserve, signaling it will be even more aggressive to fight inflation. On Wednesday, the central bank disclosed its March meeting minutes, revealing that policymakers plan to reduce their bond holdings by a consensus amount of about $95 billion a month. The minutes also indicated potential interest rate hikes of 50 basis points in future meetings. A basis point equals 0.01%.

Investors are also looking ahead to earnings season kicking off next week with reports from five big banks.

The Dow bounced back on Thursday after two straight days of losses, ending the day up 0.25% after dropping as much as 300 points earlier in the session. The S&P 500 and Nasdaq also closed higher for the day.

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Stocks Rise Slightly After Fed Selloff

THURSDAY – Stocks rose slightly Thursday as the market tried to recover from back-to-back losing sessions, while traders digested the Federal Reserve’s plans to tighten monetary policy.

The Fed on Wednesday released the minutes from its March meeting, which showed that officials planed to reduce their trillions in bond holdings with a consensus amount around $95 billion. Meanwhile, policymakers indicated that one or more 50 basis-point interest rate hikes could be warranted to battle surging inflation.

Officials “generally agreed” that a maximum of $60 billion in Treasuries and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months and likely starting in May.

The news sent the blue-chip Dow down more than 100 points Wednesday, while the S&P 500 slid 1%. The tech-heavy Nasdaq Composite dropped another 2.2%, bringing its week-to-date losses to 2.6%. Those losses came after comments from Fed Governor Lael Brainard pushed stock prices lower on Tuesday.

Investors await the weekly jobless claims data Thursday morning, which is expected to show a total of 200,000 claims filed.

Crude prices ticked higher after falling in the previous session. U.S. oil gained 0.7% to $96.94 per barrel, while international Brent advanced 0.9% to $101.95.

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Stock Start Week Flat – Twitter Rockets

MONDAY – U.S. stocks were mostly flat Monday, as traders monitor the bond market’s warning signals about the economy.

Twitter ($TWTR) shares surged more than 25% after SEC filings revealed Elon Musk purchased a more than 9% passive stake in the social media company. It comes less than a week after Musk polled his followers, questioning whether the social media giant follows free speech principles. Based on Twitter’s Friday closing price, the stake is worth $2.89 billion.

An often-cited recession signal was triggered Thursday evening when the the 2-year and 10-year Treasury yields inverted for the first time since 2019. The 5-year note yield is also trading above its 30-year counterpart.

Investors are also monitoring the latest developments in Ukraine. German Chancellor Olaf Scholz said Sunday that Western nations will impost additional sanctions on Russia in the coming days.

Seasonally, April is generally one of the best months for stocks, edging higher in the last 20 years by 2.41% on average, MKM Partners’ JC O’Hara wrote in a note. Within the 16 of the last 17 Aprils, the S&P has also inched higher.

Friday’s positive session came despite March’s employment report, which fell short of economists’ estimates. The U.S. economy added 431,000 jobs during the month, while estimates from Dow Jones called for 490,000.

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Stocks Start Week Flat

MONDAY – Stocks were steady Monday morning as a week filled with key economic reports kicked off, and investors continue to keep a close eye on the Fed’s planned interest rate hikes.

Parts of The Treasury yield curve inverted on Monday, raising some recession concerns. Earlier on Monday, the yield on the 5-year Treasury note rose to 2.6361%, while the 30-year yield was down less than 1 basis point to 2.6004%.

However, the main yield spread that traders watch — the spread between the 2-year and the 10-year rate — remained positive for now.

The Dow and S&P 500 rose on Friday to close out their second consecutive winning week. The Dow gained 153 points, or 0.4%. The S&P 500 advanced 0.5% and has more than erased its losses since Russia invaded Ukraine in late February. Meanwhile, the Nasdaq Composite dipped 0.2% but still finished the week in the green.

The moves came as investors continue to monitor developments in Russia’s war on Ukraine and expectations about the Fed’s plans to hike interest rates.

Investors are looking forward to the Job Openings and Labor Turnover Survey, or JOLTS, this week. The JOLTS report is one set of employment data that the Federal Reserve is watching closely as it tightens monetary policy.

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Stocks Now Mixed, S&P Still Higher

HTML clipboard FRIDAY – The S&P 500 was steady Friday as the benchmark index looked to close out its second consecutive positive week.

Overall, stocks were mixed early.

For the week, the S&P 500 and Nasdaq are up more than 1% and 2%, respectively. The Dow is marginally higher.

The S&P 500 is now up more than 3% in March, more than erasing its losses since Russia invaded Ukraine late last month.

The rebound has come even as the war in Ukraine continues and the Federal Reserve is set to hike interest rates several more times this year – some analysts saying as many as seven increases.

On Monday, Fed Chair Jerome Powell vowed to be tough on inflation. The remarks came after the Federal Reserve raised interest rates for the first time since 2018 last week, with hikes coming at each of the six remaining policy meetings this year.

Powell noted rate hikes could go from quarter-percentage-point moves to more aggressive half-point increases.

The central bank chief’s comments led Wall Street to raise rate hike expectations, with firms from Goldman Sachs to Bank of America penciling in half-point hikes in future Fed meetings this year.

Meanwhile, investors looked to promising signs the economy can run strong even as the Fed tightens monetary policy to address inflation.

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